Can’t repay a payday loan? Here’s what to expect and what you can do


Sometimes, life becomes too problematic when you fail to pay off a payday loan. One default leads to a series of automatic withdrawals, bank overdraft fees, and damage to your credit score.

When you have a valid and legally binding loan agreement and you live in a state where lenders can sue you, then you’re in trouble. You have the option to settle payday loans when debts are too much.

What to expect when you can’t pay off a payday loan

Payday lenders can be a pain in the butt when you default on a loan. Here’s what you can expect when you can’t pay off a payday loan.

1. What can happen: Automatic withdrawals and collection calls

Lenders initiate automatic withdrawals when they have the ACH authorization in your bank account. Even if you don’t pay them, they will take away the money from your account. And, they will continue to do so until there is no fund in your bank account. The bank will charge an overdraft fee for each unsuccessful attempt.

Once lenders have extracted every penny you had in your bank account, they will start calling you for payments. They will send letters and ask you to make payments as soon as possible. They can even assign your accounts to collection agencies if the in-house collection agencies fail to extract money from you.

What to do: Go to the bank and revoke ACH authorization

Visit the bank and revoke the ACH authorization as soon as possible. Once you revoke the ACH authorization, lenders won’t be able to fetch money from your bank account.

As far as collection calls are concerned, you have to endure them till your debts are paid off. Now, it’s up to you.

You can contact companies that offer best payday loan help to consumers to get rid of these pesky collection calls. You can ask them to explain various payday loan debt relief options to you. For instance, debt consolidation and debt settlement. Ask them various questions to know the pros and cons of these debt relief options. If debt consolidation appears to be a more lucrative option to you, then find out how much it can help you to save.

If you’re interested in debt settlement, then use an online calculator to figure out how much you can potentially save through this debt relief option. Compare your savings and choose a debt relief option that helps you to repay your payday loans one by one.

2. What can happen: Your debt escalates and credit score plummets

Legal payday loan debts can pull down your credit score once they are assigned to collection agencies. When your debts go to collections, they are reported on your credit report. Now, the credit scoring model doesn’t take collection accounts positively. It deducts a few points from your credit score as a penalty for not repaying your cash advance.

What to do: Pay off your payday loan debts

As it has already been mentioned before, you have to look for ways to repay your payday loans. You can settle your payday loans or consolidate your cash advance into a single monthly payment plan at a low-interest rate. You can also consider the Extended Payment Plan to clear your debts. But remember one fact. Only the CFSA members can offer you EPP where the interest rate is frozen. You can pay the outstanding balance in 4 equal installments.

Once your collection accounts are paid, they don’t have any negative impact on your FICO score. So, the sooner you repay your payday loans, the better for you.

3. What can happen: Jail time threats are rampant

Failure to pay off payday loans is not a criminal offense. However, some illegal payday loan companies threaten to send borrowers to jail, which is illegal. They also manipulate the bad-check laws to impose criminal charges on borrowers.

What to do: Report the issue to the CFPB

Take legal steps against the payday loan companies. Meet the state attorney general and report the issue. You can also register a complaint at the Consumer Financial Protection Bureau. If you receive a court summons, make sure you don’t ignore it. Be present in the court even if you have been wrongly accused and charged.

Some tips to avoid getting into payday loan debt

Undoubtedly, the consequences of not paying off payday loans are disastrous. Your financial life gets brutally affected and your mental peace is completely gone. So, you should always try to avoid getting into the payday loan debt trap.

Here are a few tips that you can use to avoid getting trapped into a vicious cycle of payday loan debt:

1. Check the state payday loan laws

Before borrowing a payday loan, check the state payday loan laws. Check if payday loans are legal in your state. If they are legal, then check how much you can borrow and at what interest rate. Also, find out where you register a complaint if a payday loan company scams you.

If payday loans are not legal in your state, then it’s better to not opt for them for managing a short-term financial crisis.

2. Avoid borrowing from a tribal lender

Tribal lenders are not legal in our country. They don’t come under the federal laws and have no obligation to follow them. The most important thing is that they charge massive interest rates on payday loans, which is quite difficult to pay off. If you borrow a payday loan from a tribal lender, then there is a 90% chance of getting into debt since it’s almost impossible to pay 450% to 500% interest rate on a loan.


When you’re in a short-term financial crisis, you can consider a payday loan. But keep in mind that you have to repay it as soon as possible. If you can’t pay it off, then be prepared to suffer from the disastrous consequences. If possible, you can borrow a short-term loan from a credit union. Just

read the loan application requirements before borrowing money.

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