No, unpaid payday loans won’t just go away. Defaulting on a payday loan will likely result in your debt getting sent to collections, which can stay on your credit report for up to seven years, and you could be sued until the statute of limitations for your unpaid debt ends.
Here’s What Happens If a Payday Loan Goes Unpaid:
- Additional fees and interest: You’ll typically have to pay late fees and interest charges if you fail to make payments on your payday loan. You may even be charged a bank fee if the lender tries to withdraw money from your bank account and it doesn’t go through.
- Debt goes to collections: If your payday loan goes unpaid, the lender will typically send your debt to collections. Once your debt is in collections, you’ll start to receive calls, mail, and emails from a debt collector, and you may even face a lawsuit for the amount you owe.
- Credit score damage: Debt in collections gets reported to the major credit bureaus, so your credit score will take a hit if you default on your payday loan.
- Difficulty getting approved in the future: The negative marks on your credit report could make it difficult for you to get approved for a loan or line of credit in the future.
- Lender could take legal action: When you default on a payday loan, the lender has the right to sue you for the amount owed. If the lender sells your debt to a debt collection agency, they have the right to sue you instead.
The time period lenders and debt collectors have to sue you is known as a statute of limitations, and it varies depending on which state you live in. To be clear, you could still get sued after the statute runs out, but you will be able to prove your debt is “time-barred” and get the suit dismissed.
A payday loan is still a legally binding agreement, and you should abide by the terms of the loan to avoid any consequences. You should also think twice about getting a payday loan if you’ve yet to do so, as payday loans typically come with extremely high fees that could put you in a spiral of debt if you can’t pay the loan back quickly.
This answer was first published on 03/16/23. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.
FAQs
No, unpaid payday loans won't just go away. Defaulting on a payday loan will likely result in your debt getting sent to collections, which can stay on your credit report for up to seven years, and you could be sued until the statute of limitations for your unpaid debt ends.
Do unpaid payday loans go away? ›
The Debt Could Go to Collections
If you continue to miss payments on your payday loan, the lender might decide to send your debt to a collection agency. Once the debt is in collections, you'll likely start receiving calls and letters from collection agents attempting to collect the debt on behalf of the lender.
What happens if you never pay a payday loan back? ›
Because of their short-term nature, payday loans can be challenging to pay back on time. If you don't pay back your loan, the payday lender can send your loan to collections or take legal action against you. You may pay hefty fees for not paying on time, and your credit score can be adversely affected.
Can a payday loan company come after you after 7 years? ›
In most cases, the statute of limitations for a debt will have passed after 10 years. This means a debt collector may still attempt to pursue it (and you technically do still owe it), but they can't typically take legal action against you.
How long until a payday loan goes to collections? ›
Debt collection activity: Your lender will attempt to collect payment for you for about 60 days. If you're unable to pay them within this time frame, they'll likely turn to a third-party debt collection agency.
How long do payday loans stay on file? ›
If you repay your payday loan on time and with no issues, it will stay on your credit report for up to 6 years, depending on the credit reference agency. After this time, all records of your payday loan will be removed from your credit report for good.
Is it a crime to borrow money and not pay it back? ›
No, you cannot go to jail for not paying a loan.
Will payday loans settle debt? ›
Depending on the circ*mstances of your debt, you may be able to settle your payday loans for as little as 50% of what you owe and get out of debt in 2 - 4 years. Payday lenders are generally more willing to settle debt if you mention you are considering bankruptcy.
Can I close my bank account to stop payday loans? ›
Can I close my checking account to try to stop a payday lender from taking money from it? Yes, but the payday lender will probably take collection action quickly.
Does unpaid debt ever go away? ›
Although the unpaid debt will go on your credit report and have a negative impact on your score, the good news is that it won't last forever. After seven years, unpaid credit card debt falls off your credit report. The debt doesn't vanish completely, but it'll no longer impact your credit score.
The Potential Consequences of Not Paying Back a Cash Advance
This will result in constant attempts at collecting the money, which can cause stress and will likely appear on your credit report, which will have a detrimental effect on your credit and financing options.
What happens if I don't pay back my payday loan? ›
Defaulting on a payday loan can have severe consequences such as additional fees, collection calls and damage to your credit score, or potentially even a day in court and garnishment of your paycheck.
How long does an unpaid payday loan stay in the system? ›
Payday loan defaults can tarnish your credit report for up to seven years. During that time, any lenders you contact can access your credit report and view the details of your default. They will be weary of extending you an offer, and if they do, the interest will likely be astronomical.
What happens if I don't pay back a cash app loan? ›
If you fail to make payments as reflected in your revised repayment schedule, or fail to keep any other promise you have made to us, this Repayment Plan will terminate immediately and you will be in default of your Loan Agreement.
What happens if I don't pay my cashnow loan? ›
It's crucial to remember that if you don't pay back the loan on time, you might face extra penalty charges. This means your loan could become more expensive if you delay payments. So, always plan your finances carefully to avoid any additional costs.
Do unpaid payday loans go on your credit report? ›
Generally, no, payday loans do not affect credit.
