There seems to be a lot of confusion in the blogosphere about what happens if you stop paying your payday loan debt. Let me see if I can help straighten out some of the misconceptions.
1. Will I go to jail if I stop paying on my payday loans?
The answer to that is NO. We live in a civilized society and debtors jail has been abolished hundreds of years ago. There is no way that you can to jail go by not paying your payday loan back.
2. My lender is threatening me with check fraud
While technically you may have violated a law by writing a check that you could not cover, the lender has no interest in going to the District Attorney's office to file a complaint. This may cause additional scrutiny on the lender which all payday lenders want to avoid. In addition, on average 30% of their customers are unable to cover the full amount when the loan is due. Going to the DA's office with 30% of their customers is not a reasonable request from the DA.
3. I have already paid more than double the principle of the loan, I just don't want to pay anymore
If you are in a situation where you have been a good paying customer, the lender will likely be willing to work with you. Many lenders will look at your payment history and if they made money on your loan, they may be willing to give you special treatment by waiving the final finance charge or waiving the principal amount entirely. The point is that you will not know what the lender is willing to do until you call and try to work out a payment plan.
4. My lender is threatening to sell my loan to a collections agency and I don't want the harassing phone calls
This is actually a good thing. If your lender is threatening to sell your loan to a debt collector, then you should let them go ahead and sell it. The reason is, when you are dealing with the lender, they are looking to collect on the entire debt. However, with a debt collection agency, they will be more willing to settle for pennies on the dollar. Collection agencies need to get a lot less money from you to turn a profit. Remember the lender sold the debt for pennies on the dollar, so the incentive for the collection agency is much lower to make a profit from you. The problem with this strategy is that you will have a charge off on your credit report. Even though it was settled, it may negatively impact you when you get your next loan.
I hope this answers some of your questions regarding not paying back payday loans and I have calmed some of your fears.
What Happens When You Cannot Pay Your Payday Loans?
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