Can I Go To Jail For Not Paying A Payday Loan?
The short answer is no.
If you’re facing a surprise money problem and a lot of debt, you might need help to repay your payday loan. It could make you worried that you might go to jail if you can’t pay what you owe. In almost all conditions, you won’t go to jail if you can’t repay payday loans.
Key Points:
- No, you won’t be jailed if you can’t repay a loan.
- Payday lenders will collect the payment first in the standard way.
- The loan provider will contact you through phone calls, emails, and letters in the mail.
- A borrower might have to pay extra charges in the form of interest and fees.
- Your credit rating can be influenced or down.
What will happen if I can’t repay my loan?
If you borrowed a payday loan, you probably believed back then that you could easily handle paying it off every month. But situations can change as time passes, and if you’re finding it hard to repay your debt now.
The outcomes of not making payments have different levels of seriousness. Based on the payday laws in your province, these outcomes might be possible:
- If your account needs more money, the payday lender could also pay you a fee.
- If you need more money in your pre-authorized payment account, your bank might also make you pay a fee for insufficient funds.
- You might have to pay an extra charge and interest for missed payments.
- Your credit score could be downed.
- The whole amount you owe, which includes the extra charges, will keep getting bigger.
- A debt collection agency might get involved in trying to collect the money you owe.
- If you miss payments often, it could lead to a “default.”
- You might receive a Canadian Centre for Justice Statistics (CCJS) notice for legal action.
The laws set by your province decide what actions a payday lender can take to collect a loan. It covers when and how often they can contact you and the methods they can use to encourage you to make payments.
Contact the consumer affairs office in your province or territory to get more details about debt collection.
If you don’t pay your payday loan on time, you could end up caught in a cycle of debt that’s hard to escape.
What should I do when struggling with loan repayments?
If you’re having an unsuitable time making payments, here’s a plan of steps to help you get back on the right financial path:
- Create a budget, watch it closely, and make changes when needed.
- Don’t multiply your debt further. Talk with your family and get everyone on board to lower the debt. Close any accounts you don’t need.
- Keep track of your spending by writing down every amount of money you use. It assists you to see where your money is going and where you can cut down on expenditures.
- Boost your income. Sell things you don’t need and use your talents or hobbies to earn extra money.
- Get in touch with your credit providers to talk about a plan that could assist you. For instance, ask for smaller payments spread over more time or consider a consolidation loan.
- When you finish paying off one account, keep using that same payment amount to contribute more towards paying off another debt.
- Make a list of all the credits you owe and figure out which ones you should focus on priority. You can clear that debt more quickly by paying more than the regular monthly amount.
- If you need more clarification, gain the advantage of seeking professional advice.
Why do payday loans sometimes lead to spiralling debt?
Taking out a payday loan can bring about significant changes in your life, like covering expenses for exciting vacations, cars, improving your home, and many other opportunities.
But if you can’t stay on track with your payments, it can cause crucial problems. It might result in going to court, having trouble borrowing money later on, and even impacting your chances of getting a job.
They’re called “payday loans” because they target people who need extra money to get by until their next paycheck. Using payday loans is like being on a treadmill that keeps getting faster. You can’t keep up and are unsure how to stop safely.
Here’s How Payday Loans Sometimes Lead to Spiraling Debt.
- To get advance cash from a payday lender, they ask the borrower to write a check with a date for their upcoming payday.
- The lender encashes the check on that payday before the applicant can use the money for buying groceries or paying bills.
- The interest rates are incredibly high (more than 300% on average), which makes it hard. Along with repaying their loans, people must also manage their regular living costs.
- Borrowers usually feel like they have to keep getting new loans, one after the other, which leads to extra fees each time.
