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No, it is extremely rare to go to prison for not paying back a payday loan. A lot of people who are struggling to repay payday loans worry that they might be facing jail time if they are unable to repay. However, in the vast majority of cases you cannot go to jail for not repaying a loan.

Having debt hanging over you is unpleasant and can be extremely stressful. At Finger Finance, we endeavour to make payday loans as simple and clear as possible. In this article we will cover everything you need to know about what could happen if you are not able to repay your payday loan.




What Are The Repercussions Of Not Paying Back A Loan?


Potential repercussions for not paying back a payday loan include:


  • Collection Efforts – Lenders may employ collection agencies to attempt to recover the debt. These agencies can contact you by phone, email or mail to request repayment.
  • Legal Action – If you do not respond to collection efforts or make arrangements to repay the debt, the lender may choose to take legal action. This can result in a judgment against you, which could lead to wage garnishment or liens on your property.
  • Credit Damage – Failing to repay a payday loan can negatively impact your credit score. The lender may report the debt to credit bureaus, which can lower your credit score and make it more difficult to obtain credit in the future.
  • Additional Fees and Interest – Payday loans often come with high interest rates and fees. If you do not repay the loan as agreed, these fees and interest can accumulate, making the debt even more challenging to manage.


What Will Happen If I Do Not Repay My Payday Loan?


The first thing to know is that if you are not able to repay your payday loan this will affect your credit score negatively. Being unable to repay your loan will affect your credit score, meaning you will be less likely to be able to borrow money in the future.

Defaulting on your payday loan can drain your bank account, trigger wage garnishment, collection calls and lawsuits. Wherever possible you should settle your debt before any of this happens.

Once the agreed loan period has passed the lender who you borrowed from will continue to seek any unpaid amount on your loan. This will happen as the lender sets up automatic withdrawals from your account, attempting to regain as much for their loan as possible. This can result in bank fees for you. 

Although you will not go to jail for failing to pay back a loan, lenders often take clients to court, to claim back the money they have lost. It is common for these cases to be over small amounts of money, so don’t be surprised if failing to repay your small loan results in a court case. Never ignore a lawsuit, lenders often win because customers who have failed to repay their loans simply don’t turn up to court.

Your lender may set up wage garnishment, which involves a part of your paycheck being withheld, and going directly to the lender to repay your loan.

During the time in which your loan is not being paid, it will still be accrediting interest. Wherever possible you should pay back your loan within the agreed upon period, after this time your loan will start gathering extra interest, and can quickly become uncontrollable.

It is worth noting that a payday loan is only ever designed to be used as a short term fix, for unpredictable, unexpected one-off payments. A payday loan should be used to bridge the gap between one pay cheque and the next. That means that you should only ever be borrowing for a short period of time.


Is There Any Type Of Debt I Can Go To Prison For?


Yes. There are examples of debt where jail time for not repaying is a possibility. Some of these debts include:

  • Criminal fines
  • Business rates
  • Tax evasion


What Should I Do If I Can’t Repay My Loan?


Being unable to repay a loan can be an incredibly stressful situation. If you still need to pay rent and put food on the table for your family that has to come first. In situations like this, it is advisable to seek advice from a non-profit credit counsellor, bankruptcy attorney or legal aid centre about your next moves. 

Make sure that you read and understand the terms of your loan agreement. It is crucial to contact the lender to discuss your situation and explore options for resolving the debt. Lenders may offer options such as extended repayment plans or debt settlement arrangements.

Ignoring the issue can lead to more significant financial and legal problems. So make sure that you are communicative with the lender throughout the process.

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Charlotte Diffey

Charlotte is an expert writer with lots of experience in the financial world. Read her articles for useful guides on payday loans and advice on how to boost your savings.