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If you cannot pay back your loan, going to prison is extremely unlikely. You could receive penalties, fees for being late, and a credit rating that goes down. Read on for more information on what happens when you don’t repay your payday loan. So, if you’re asking yourself – Can I Go to Prison for Loan Default? – you’re probably going to be OK.


Key Facts:

  • Going to prison for not repaying a loan is very unlikely
  • The additional interest and fees could send you into a financial tailspin
  • When your credit rating goes down due to a bad repayment history, your credit rating will make it much more difficult to receive a loan in the future.
  • Lenders may send letters and call you in an attempt to recoup their losses. They could sell your loan to a collection agency that would do more of the same.
  • If you can’t repay your loan you can talk to your lender about alternatives to the original repayment schedule. 


What happens when you don’t repay my payday loan?

You could receive letters and calls from your lenders because they will continue to try to get you the funds from you. They don’t want to take a loss so won’t give up easily.


What if they take me to court?

If you’ve been taken to court by your lender, who wants to get their money back, only in very rare cases could you be sent to prison. talks about situations where you do not repay your loan and then the borrowers try to sue you. In this instance, if you do not show up in court on many occasions, the judge overseeing the case could issue an arrest warrant for you. But again this is highly unlikely. In the majority of cases, there’s no need to be concerned about a prison sentence if you do not repay your loan.


More Detail on What Happens for a Loan Default 

At Funding Zest, we understand the fear that comes with not being able to follow through on your promise or your plan to repay your loan. So we’re going to go through in more detail what could happen so you understand what’s in front of you if you are not able to repay your loan. 


What happens to me for not repaying your payday loan? 

If you find that you cannot keep up with your payments on your loan these things could happen:

  • Your lender could send emails 
  • They could call 
  • They could send letters
  • Your credit score could go down
  • There will be possible penalties and fees for being late. 
  • If you try to borrow in the future one of two things could happen.
    • In the future, if you apply for a loan you may have much more difficulty actually obtaining a loan
    • If you are offered a loan, the rates would more likely be much higher than someone with good credit. 


So is jail a possibility for you?

Are you worried about going to jail for not repaying a loan? Jail is really not a huge possibility. What’s more likely if you don’t repay your loan is that your credit rating goes down, making it more difficult to get a loan in the future. 


What’s the best way forward if you can’t repay your loan?

We’re pretty sure you’d rather avoid the negative repercussions listed above for not repaying your loan. So, we recommend talking to your lender. Lenders who are in the know can try to help. They’re more understanding if they know what’s going on with you. They can work with you to find an alternative way for you to settle your debt. 

If you can’t stick to the agreed repayment schedule, sometimes the lender will work with you to stretch out the loan. But the longer you let your loan go, the more interest you’re accruing, and it makes it even more difficult to manage your debt going forward. 


More Bad Things That Can Happen

If you fail to repay your loan, your bank account can be drained and your wages from your job can be held. And not only that, you can get annoying calls from collection agencies and lenders can bring lawsuits against you. You could also be fined by your bank because, as the lender continues to take money through automatic bank withdrawals. When your paycheck is held back then wages are garnished. When this happens, you no longer get your full paycheck which can increase your financial issues. 

So although you’re not going to end up in jail, your lender could make your life miserable. Of course, no one wants to go to court but if you’re summoned please make sure that you show up. If you do not the judge can find against you and there could be greater fines and repercussions.


Would Court be in My Future if I Default On My Payday Loan?

It’s possible that your lender could send you a court summons to encourage you to pay off your outstanding loan. If you have more than one loan, in fact, many loans and have avoided repaying them for an extended length of time. If the sum that you owe is quite large, you could be taken to court. The lender does this because they extended the loan to you and expected you to pay it back.


Is there a chance that I could end up in jail if I don’t repay my payday loans?

You would not end up in prison but there are other types of debts where you could end up serving jail time. Some of these are criminal fines – not paying your business taxes and not paying child maintenance fees.


Budget your payday loan repayments

Always make sure you keep on top of your repayments. Make a schedule. Have a plan because the consequences are large and can not only end up in fines, fees, penalties, but a poor credit rating and worse.


If you can’t repay your loan what should you do?

If you’re just unable to repay your loan, go to your lender and talk to them about it. ignoring their repeated attempts to contact you only makes it worse. If you avoid talking with them your lender can escalate the types of responses. As mentioned before, if you tell them what’s going on and that you are having difficulty repaying your loan that’s a good way to go. They want you to succeed in paying off the loan. It’s the best thing for both of you. They can reschedule your repayments, at lower amounts but for a longer period of time. This is called a pay plan or a lender arrangement.

In the US, lenders are required to help and they have procedures to follow and ways to work with people who are struggling to repay their loans. If you find you need help beyond this, you can get advice from nonprofit credit counselors, an attorney who deals with bankruptcy or there are legal aid centers out there to give you the tools and information that you need to move forward.

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