Most payday lenders do not review the credit history of a borrower or credit score with the three major credit bureaus – Trans Union, Equinox and Experience – to decide who will get a loan. They also do not report on-time payments to the offices, so your credit rating improves.
That said, if you do not pay the loan, the credit bureaus are likely to hear about it and your credit score will be damaged. While the payday lender may not report any overdue loan to the credit bureaus, the collection agency to which the lender sells the defaulted loan could do so.
If the collection agency calculates that there is very little chance that the loan will be repaid, it can reduce its losses and immediately report the failure to the credit bureaus. If the agency has a chance to get paid, it would probably be slow to report a missed payment as a lever.
On-site lenders and online payday lenders will do their best to collect the money themselves, because if they sell debts to debt collection agencies, they only get pennies for every dollar of debt.
Efforts will be made on two fronts: lenders will continue to try to withdraw money from your account, sometimes splitting amounts into smaller chunks to increase the chance that the payment will be transferred. Any failed attempt can trigger bank charges against you.
At the same time, payday lenders will start to call you, send letters from their lawyers and even call your personal references.
A second alternative might be that a lender may try to negotiate an agreement with you about part of the money owed.
The third step is to outsource the loan to a debt collector, a step that can take less than 30 days. A collection agency, also known as a collection agency, will call the credit bureau and may file a civil suit if the amount is large enough to justify the costs. A judgment against you remains public for seven years and may result in confiscation of your property or a garnishment.
What are my alternatives for fast cash?
Your friends and family can offer the most flexibility and the best loan terms, but not everyone has a choice or is comfortable with it.
If you have some time, you can look for ways to quickly save money or more money – from selling goods to increasing your income through secondary concerts.
And as soon as your immediate emergency is over, start setting up an emergency fund. If you can save a few hundred dollars over time, you’ll pay back the lender in case of emergency. In the long run, the best hope is to get out of the pay-to-paycheck treadmill.
Payday loan alternatives to avoid
Payday loans: Available both on store fronts and online, these credits extend the repayment terms to three years. You do not need a good credit – they often advertise themselves as installment loans without checks – but you usually have to meet the requirements of a payday loan: a paycheck and a bank account. Interest rates are rising rapidly over time: a $ 2,000 loan over three years at 400% APR will cost more than $ 16,000.
Car Title Loans: These short term loans, if you are legal, require you to give up the title of your vehicle as collateral for the debt. They are often compared to payday loans, and interest rates are similar, but they can be even worse: if you do not repay, the lender can grab your car.