Payday loans are a unique type of short-term, high-interest rate loan that helps those in need of immediate cash between paychecks. This service is most helpful as the Federal Reserve reports that roughly half of all Americans do not have savings set aside for emergency financial situations. There is also a large number of Americans who live paycheck to paycheck and see payday loans as more of a necessity than a luxury.
The most habitual users of payday loan services are those who cannot acquire a credit card and do not have a savings account. Individuals who lack credit or have credit issues also make up a large part of those who utilize payday loans. The unfortunate possibility of taking out any loan is that you may not have the funds needed to pay it off when the time comes. With that said, it is most important to know what will happen if you can’t pay a payday loan.
How Payday Loans Work
The payday loan process is simple and has become easier with the help of technology. You can apply for the loan on location or submit your application virtually. One must simply provide their personal and financial information, request a loan with a check or bank account debit authorization, pay the finance charge, and leave with cash in hand. Anyone with a checking account and steady employment can apply for a payday loan.
In the state of Illinois, the annual percentage rate (APR) on a payday loan can be as high as 400%, easily surpassing the 9% to 30% APR applied to most credit cards. You must also repay the borrowed amount plus interest within two to four weeks. Taking out a payday loan is seen as necessary by many, but can have an opposite effect as it can put you deeper in debt with every missed payment.
Missing a Payday Loan Payment
Every time you reschedule a payment and miss the payment date, interest accrues, but that’s just the least of your worries. If you default on your payments and fail to negotiate a repayment plan with the lender, they have the freedom to sell your account to a debt collection agency. They will then report the delinquency to the three major credit bureaus, almost guaranteeing a noticeable drop in your credit score.
The account of an unpaid loan will stay on your credit report for seven years, and disrupt any future attempts to apply for credit or a loan. The collection agency can also legally sue you for your defaulted account to gain a judgment. If the judge decides in favor of the plaintiff (the creditor), they can pursue wage garnishment, freeze your bank accounts, and seize property to sell for debt repayment.
Don’t allow a seemingly insignificant payday loan to transform into a life-altering legal case. When you realize that you may be unable to make a payday loan payment, contact Benveniste Law Offices. Heather Benveniste can discuss repayment options with lenders and prevent your debt from going into collections. If you are sued for debt, Heather can also serve as your legal representation throughout the legal process. Contact us today at 1-800-497-5358 to speak with an Illinois debt settlement attorney today.