Payday Now Explained What Happens If You Miss a Payday Loan Payment
If you’re in the market for quick cash for your next payday You might be contemplating getting a payday loan. This could be especially the case in the event that you don’t have top credit and don’t qualify for other loans. Although it’s very easy to obtain payday loans this kind of loan is quite expensive.
Payday loans have high rates of interest and charges that can make them difficult to pay back. If you don’t repay the payday loan, your account might be sold to a collection agency which could harm your credit.
What Happens if You Default on a Payday Loan
- Additional charges and interest Based on your location and the lender you select you could be charged additional charges if you are unable to pay back the payday loan. These are known in the form of nonsufficient fund (NSF) charges and are charged when you don’t have the funds needed to cover an expense.
- Debt collection process The lender will try to collect the payment on your behalf over the course of about 60 days. If you aren’t able to pay them in this period then they’ll likely go to an agency for debt collection from a third party. The debt collection company to contact you and write periodic letters until they have the funds. It is likely that their efforts to collect are much more effective than the efforts of your lender.
- Damaged credit score If you pay back the payday loan in a timely manner your credit score won’t be affected. However, when you fail to pay the loan and your debt falls under the control of a collection agency and you are unable to pay it, you’ll see an increase in your score.
- Court summons In the event that you’ve defaulted on a minor amount there’s a good chance that the collection agency will summon you to the court. Depending on the location you live in it could result in the encroachment of liens on your property or even garnishing your wages.
- The difficulty of securing future loans Because a payday loan’s default can remain for a long time on the credit report for as long as 7 years, it is possible that you could face difficulties getting accepted for any other loans in the future.
- Threats to arrest It is not legal for lenders to threaten you with jail or arrest however, they can do it in the event. If you are the victim of this kind of threat, you should be sure to contact the state attorney general’s office immediately.
How to Rebuild Credit After Defaulting on a Payday Loan
It’s a fact that committing default in a cash advance may result in a lot of anxiety and uncertainty about the future. However, there are methods to restore the strength of your credit and decrease the impact of the situation. Here are some suggestions to help you.
- Be current with your payments If you’re not able to come up with the money to pay on your debts it is possible to lower your expenses or get part-time work or a part-time job. You can also seek assistance from a professional with credit advice and the debt management program (DMP) as well as debt consolidation.
- Make sure you pay your bill promptly It’s true that even one late payment can damage your credit. Therefore, it’s essential to pay your bills in time. If you’re concerned that you’ll not remember your payments, sign up for automated payments or schedule reminders on your calendar. This will help you make sure that you’re paying your mortgage credit card, auto loans, and other obligations are paid on time in a timely manner.
- Be aware of Your credit usage ratio This is your credit utilization ratio represents what you pay for the credit you’re using compared to how much credit you have. Your credit utilization shouldn’t be greater than 30% and the lower it is, the more favorable. Maintaining your spending in check and keeping your having your balances at a low level can assist you in reaching that.
- Review your credit report on a regular basis Make it a habit to keep an eye on it every month your credit report. You can visit AnnualCreditReport.com and get an annual free copy of your Experian, Equifax, and TransUnion reports. It is also possible to obtain the Experian credit reports for free every 30 days after signing in. Check for any negative marks that could hurt your score.
You Can Move Forward After Defaulting on a Payday Loan
If you fail to pay back payday loans and you fail to pay it back, you must do everything you can to restore your credit and overcome this financial problem. There is however an upside. After experiencing this situation it’s likely that you’ll be a better borrower and go out of your way to avoid similar financial issues in the near future.