An estimated 6 million of payday loan borrowers are defaulters for the same each year. This is only 50% of the yearly payday loan borrowers.

A payday loan means the instant your payment checks into your bank account, the lender immediately starts receiving their amount from your bank. This happens with no regard to whether your account’s funds are sufficient or not and will continue until all the debt is settled.

A loan will sound like a great idea when you need the money. Quick money to help you cover that cash emergency, right? But you may not be of the same opinion come payday.

Payday loans are not only expensive but also difficult to pay back. Most borrowers end up paying back the loan for a number of months at outrageous interest rates.


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Is it almost payday and are worried about that loan? Does it seem like you are running out of options?

Well, the good news is you don’t have to be. Here are the three things you should know if you can’t pay back your payday loan.

1. Negotiate Payment Terms with Your Lender

So, payday is drawing near and your account is not loaded enough to settle the debt and other financial obligations?

You may rally up some friends or relatives to help service the loan and get off the lenders hook. However, sometimes we all want to deal with our situations the same way we got into them: privately.

Consider paying your lender a visit and discussing new payment plans besides the initially planned payment process. This could include:

  • Make partial cumulative payments in the proceeding months at a new agreed rate to offset the loan

You can even negotiate into paying at no extra cost! This gives you the chance to set apart amounts you would be comfortable within your budget for the coming months.


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  • Commit to paying a lump sum amount of what you owe at a date of your convenience

You should only make this commitment for a date when you would be financially fit to do so. Successful payment on this date would build a better relationship with your lender, opening up chances for future help in the case of financial emergency.

  • Get a second payday loan

This should be very last resort to sorting out your situation. The second loan could offset the first one to avoid the penalty that would come with defaulting. However, this increases the interest for the loan, costing you more in the form of interest in the long run. It can’t be insisted enough that this is only the last kick in the donkey that is loans as it can very easily create a spiral cycle of payday loans, robbing Peter to pay Peter.

The most important detail about this negotiation is putting it down on paper with due signatures. This makes for proof and to ensure the lender doesn’t go against the agreement and come after you, which most times comes with debt collectors and the stress they bring.

In addition to that, it’s your legal right to be directed by your lender toward free and debt advice.

2. Consider Alternative Loan Options

Usually, payday loans are marked for unexpected emergencies, a rainy day. Contrary to that, only 16% of borrowers use it for this purpose with a whopping 69% using it to service recurring expenses like gas, food, and credit card bills. Hypothetically, this means that 69% will be in constant need of cash and their probability of staying in debt is very high.

Payday loans might be easy and quick, but have you considered other loan options?

Payday loans come with minimum requirements but at the expense of high costs because the devil is in the detail—in this case, fewer details. Taking out a loan is for the purpose of streamlining a financial crisis, not the creation of another crisis in the long term, creating value for money, don’t you think?

Other options include the following.

Credit Card Cash Advances

Do you have a cash emergency? Credit card cash advances come in handy in such moments. But they usually have very high interest rates and are better off being used for short-term finances only.

Personal Installment Loans

Looking for something a bit more affordable? Why not try out personal installment loans.

Should you qualify, you get to have a fixed repayment schedule. The interest rates are also a bit lower than those of credit card cash advances.

Personal Lines of Credit

These work in a similar way to credit card cash advances. But the interest rates are much lower than the former and are higher than those of personal installment loans.

So, it’s payday, but you can’t seem to repay your loan and still have some money left. What do you do?

For starters, you will need to cover all the basics first. Do you have enough money for food, rent, and necessities? Community assistance plans could come in handy at such points.

Alternatively, you could have a credit counselor talk to you about possible moves, such as bankruptcy. Do your debts take up half or more than half of your total income? Filing for bankruptcy could be your only option.

3. Cancel the Recurring Payment

It’s almost payday, and your debt is due in a few days. But from your calculations, you may not be able to cover basic expenses once your lender gets their share of your income.

What is the quickest solution to this? How about canceling the recurring payment?

This can be done in a matter of minutes. Simply call your bank and request to cancel the recurring payment. This is what allows your lender to take the money you owe them directly from your account.

Of course, you will have to inform your lender of the decision as well. But you don’t have to do so before withdrawing the permission for a direct payment.

Ensure that you note the date and time that you called the bank to cancel the retirement. Should your lender still access money directly from your account, the law requires that the bank must pay you back.

To cancel the recurring payment, it is better to make the call at least a day before the repayment is due. If possible, several days’ notice would be better. Be sure to follow up that call with a formal letter to the bank.

Why Is It Easy to Get Drowned in a Payday Loan?

Ever come across those websites with pop-up messages on payday loans? They are quite promising on a quick buck in the form of a payday loan and give the illusion that the money is easy to pay back. When you’re desperate for money, you might miss the small print on the loan contract like the high interest rate these loans can come with.

The Consumer Financial Protection Bureau estimates that twelve million Americans take out a payday loan every year with an average of $9 billion spent on loan fees.

Research done by the Pew Trust shows that as much as payday loans are supposed to be short term, the average payday loan borrower can carry their debt to up to five months a year, which leads up to spending an average of $520 in fees to borrow $375 repeatedly.

Even with payday loans being linked to emergency use or unexpected occurrences, 7 in 10 borrowers use them for regular, recurring expenses, such as rent and utilities.

This use of a payday loan, in turn, affects the chances you have of paying back the loan, leading to defaulting.

Defaulting a payday loan leads to higher interest rates, and soon enough, your loan snowballs into an amount you can’t catch up with. At this point, the lender can drain your bank account or bombard you with constant collection calls that are a hazard on their own. They can even go as far as drawing a lawsuit against you that will definitely cost more to deal with.

The easy access to a payday loan may blind you to the repercussions borrowing might bring, especially when it comes to its interest rates. So, doing research and knowing the ins and outs of your contract is very important.

Getting a payday loan is great if you need some quick cash. But even when faced with some emergencies, be sure to do your homework. You may just be saving yourself from one big headache once the lenders come knocking.

Do Payday Loans Affect Your Credit Score?

An important piece of payday loan information is whether it affects your credit. And if it does, by how much?

Sure, you may need to take out another loan in the future. Does your payday loan affect your credit score?

Because of the high interest rates, it’s easy to get caught up in your debt. If you don’t pay within the agreed time, payday loans can quickly amount to huge debts.

The more you keep defaulting your loan, the more your lenders are entitled to take further action. Often, they will turn to collection agencies to help them recover their money. They will do this by selling the debt to the agencies.

Collection agencies have the right to report the account to the credit-reporting agency. A seven-year window period is given, after which the account is removed from your credit automatically. Your lender may still try to recover the debt, but it will not appear on your credit report.

Wondering what happens in the case of a lawsuit? The agency, or the loan company, may decide to take things up with the law.

Once the judgment is passed, your case becomes a public record. It may appear in the public record section of your credit report and affect your score negatively.

Do I Face Jail Time If I Can’t Pay Back My Loan?

As far as all types of loans are concerned, this is a common question. And with good reason too.

Prison isn’t exactly the best idea for a vacation. And we understand your concerns. But you can’t go to jail for defaulting a payday loan.

Lenders will often result in threatening you with jail terms. But this is illegal, and you should follow some procedures to report such cases.

First, it helps to be informed on what your lender can and can’t do. Go through the terms of your agreement and ensure that you understand them.

You could start by complaining to your lender. Should you feel that your complaint was not heeded, you can take it up with your state’s attorney general.

Now, don’t think that prison is just a threat. Your lender may go ahead and file a lawsuit. Depending on how the lawsuit turns up, you may end up having to pay huge amounts in terms of fees and penalties. Failure to do so, or failure to appear in court, may be your one-way ticket to a state penitentiary.

Should the court decide that you are legally supposed to pay back the debt, your lenders may be given the right to levy your bank account.

Final Thoughts

Payday loans may seem like a quick fix. But they are really a more expensive option. What’s more is that they are extremely difficult to pay back. So, unless you have an elaborate plan to get back the money, stay away from payday loans.

Sure, sometimes, you may be forced to get a quick solution. And perhaps not everything is in place come next payday. Use the above three tips to help you out of the mess.

Before taking out a payday loan, be sure to exhaust all other options. Defaulting a payday loan has some serious consequences that you can easily avoid.

For quick payday loans and related topics, get in touch with us today.

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