What Is The Penalty For Failing To Repay A Payday Loan?

Payday loans are short term solutions to temporary financial problems

. If you need cash to cover an unexpected expense, then you can get money quickly and easily using a cash advance. The main benefit to this type of loan is that it is easy to qualify for. Regular bank loans require you to have exceptional credit in order to secure them and get a good interest rate. Payday loans, on the other hand, don't require a credit check. All you need is a checking account in good standing, a job, and a stable residence. However, it is important that the money is paid back in a timely manner or you risk a penalty.

There are several things that can happen if you default on your loan. First, additional fees will be tacked on to the loan. Most companies will charge a returned check fee if your bank rejects your check for non-sufficient funds. This fee can range anywhere from $25 to $50 per incident. If the check is submitted several times and rejected each time, then the fees can quickly get out of control. In addition to the NSF fee charged by the cash advance company, your bank will usually levy a financial penalty for bouncing checks as well.

You may also continue to accrue interest and renewal fees on the unpaid balance. This varies per company so you will need to check your contract to verify if this is true for the company where you got your loan. If the account is sent to collections, most collection companies will tack on a penalty of their own for the work they do to collect on the delinquent account. Collection agencies are regulated by the federal and state government. Therefore, you will need to check local and state laws to determine the maximum amount that can be charged to you.

Lastly, if the account continues to remain outstanding, you may be sued in court for the money owed. The cost of filing the suit is usually tacked onto the loan as well as any attorney's fees. You will also lose money from hiring your own lawyer and having to take off work to show up in court. Before you know it, a $200 loan that goes into default can end up costing you several thousands of dollars if you default on it. Avoid the penalty by paying off your loans. If you get into trouble and can't pay, contact the company as soon as possible to work out a payment plan.

by: Troy Truman

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