What happens if you can't repay a payday loan
If you miss a payday loan payment, the lender will try to debit your account, add fees and eventually send the debt to collections or sue. You cannot be arrested, and you can stop the automatic withdrawals and ask for a payment plan.
The short version
- Failed debits cause fees from both the lender and your bank.
- Unpaid loans can go to collections and appear on your credit report.
- A lender can sue, but cannot have you arrested.
- You can revoke bank authorization and request a payment plan.
On this page
The first days: failed debits and fees
On the due date the lender cashes your check or debits your account. If the money is not there, the payment bounces. The lender can add a returned-payment fee where state law allows it, and your bank may charge its own insufficient-funds or overdraft fee. Lenders often retry, sometimes in smaller amounts, and each failed attempt can trigger another bank fee.
The first weeks: calls and collections
The lender will call, email and write. After a period that varies by company, it may sell or assign the debt to a collection agency. Collection accounts can be reported to the credit bureaus and stay on your report for up to seven years. Debt collectors must follow federal rules: no threats, no calls at unreasonable hours, and no contacting you at work if you tell them not to.
Later: a possible lawsuit
A lender or collector can sue for the unpaid amount plus allowed fees. If it wins a judgment, it may be able to garnish your wages or levy your bank account, subject to state limits. Always respond to a court summons. Ignoring it produces a default judgment, even on a debt you could have disputed.
What cannot happen
You cannot be arrested or jailed for failing to repay a payday loan. A lender that threatens arrest, or says it will file criminal charges over a bounced check, is breaking the law in most states. Report it to your state regulator and the CFPB.
What to do right now
- Contact the lender before the due date and ask for an extended payment plan. Many states require one at no extra cost.
- Stop the automatic debits if they are draining your account: revoke the authorization in writing and give your bank a stop-payment order.
- Do not take a new loan to pay the old one. That is how one fee becomes many.
- Call a nonprofit credit counselor for a free review of your options.
- Keep records of every call, letter and payment.
If the loan was illegal in your state
In states that ban payday lending, or where the lender had no license, the loan may be void or the lender may be barred from collecting fees. Your state regulator or attorney general can tell you where you stand; see your state’s page.
More help: getting out of payday loan debt and can payday lenders sue you.
Common questions
Can I go to jail for not paying a payday loan?
No. Unpaid consumer debt is a civil matter. You can be sued, but not arrested for the debt itself.
Will an unpaid payday loan hurt my credit?
Yes, once it is sent to collections and reported. Payday lenders rarely report loans that are paid on time.
How do I stop a payday lender from debiting my account?
Tell the lender in writing that you revoke authorization, then give your bank a written stop-payment order at least three business days before the next debit.
Does Northlight lend money?
No. Northlight is an information site. We explain costs and state rules; we do not make loans or credit decisions.
Check the rules where you live
Whether you can borrow, how much, and what a lender may charge all depend on your state.
Sources
Keep reading
- Are payday loans legal?Payday loans are legal in 29 states, capped at 36% to 50% APR in 10 and not allowed in 11 states plus D.C. See which group your state is in.
- Payday loan scamsUpfront fees, fake debt collectors and unlicensed lenders: learn the most common payday loan scams and the checks that confirm a lender is real.
- Can payday lenders sue you?Yes, a payday lender can sue over an unpaid loan, but it needs a court judgment to garnish wages. Learn the process, the limits and your defenses.
- Payday loan APR explainedWhy a $15 fee equals a 391% APR, how to calculate the APR on any payday loan, and what fees can be added on top of the finance charge.
- Credit card cash advanceA credit card cash advance costs a 3% to 5% fee plus a higher APR with no grace period. See the real cost and how it compares with a payday loan.
- How to borrow money fastA practical order of operations for borrowing money quickly: what to try in the first hour, the first day and the first week, with typical costs.