- Emma Anderson
- October 5, 2019
Payday loans are the quickest source of funding short-term needs. As the repayment length of these loans is very small, most of the borrowers feel that they can quickly repay the loan, but more than 80% of the borrowers fail to pay it off and eventually they end up with rolling over the loan. No matter how notorious they are, no other short-term loan is as quick as them when it comes to funding financial emergencies.
Salaried borrowers generally rely on these loans. Further, direct lenders can allow you to borrow money despite your poor creditworthiness. These loans are also famous among the unemployed, called payday loans for unemployed direct lenders. They are not a terrible dream as long as you can repay what you owe, but the problem arises when you fall short of cash.
Whether your lender will take you to a court or not depends on the type of your contract. Since it bears your signature, you are bound to all terms and conditions of the contract. If it mentions that the lender can sue you for not settling the debt, you are likely to receive a summons. However, there are rare chances that the jury will put you behind bars. Here is what happened when you stop paying off your debt:
The payment method for payday loans is generally auto-debit mode, which means you do not need to get into the hassle of transferring money to the lender. As your payment gets due, your account will automatically be debited. They are likely to break the debt into smaller chunks to extract whatever the money is available in your account. Successful attempts will drain your account and each failed attempt will charge bank fees against you.
At first attempt, the lender always pulls money from your account. When this strategy fails, they will refer you to the debt collection agency. You will start receiving the calls. They will start sending notifications and emails and if you do not turn to them, the lender will send a court to summon. When you start receiving notifications, you should immediately respond to them. Try to negotiate if they are ready to accept less than what you owe. They are likely to agree to your proposal if you inform them of your true financial condition.
Failing to repay the debt is not a criminal offence. In fact, it is illegal to threaten you. However, some lenders file a suit against borrowers when they fail to pay off the debt. It is important you know all the clauses of your contract at the time of signing. When you receive a court summons, you should prepare yourself for the trial. You cannot ignore it even if a lender has issued it mistakenly.
Never think that your lender will not sue for a small amount. The fact is all lawsuits against consumers are relatively for a smaller amount. Most of the borrowers do not appear before the jury due to which they give a verdict that is unlikely to be in your favour. They may not put you behind bars, but orders the debt collection agency to use your assets to recover money. Never forget to ask for evidence when you are alleged that you did not settle your debt. This will give you complete details about your dues.
What to do when you fail to pay off the debt
Though you can prevent yourself from incarceration, you cannot avoid losing your assets. Before your lender transfers your case to the debt collection agency, you should seek advice from credit counsellors they will help you make strategies to pay off your debt.
The bottom line
Never think that debt will go away itself. Even if you have a small amount of debt, you should figure out ways to pay it off. Try to create a budget to cut down on your spending, talk to debt counsellors and make an effective repayment plan.