One of the biggest questions someone might have before applying for a short term loan is what will happen if I can not pay it off? Short term loans are usually very small and rarely exceed $500 and as such they are fairly easy to pay. However, there have been plenty of times when a person could not not pay off their loan on time due to whatever reason.
When someone can not repay their short term loan what won’t happen is the borrower will not get sued, in most cases anyways. This is mostly due to the low amount of the loan in comparison to the legal fees that would be necessary to recoup the money via the courts.
What will happen is the delinquent borrower will be aggressively compelled to pay off the loan by a legion of collection agencies. Lenders may have their own collection agents or they may outsource the task to one of many collection agencies. The Fair Debt Collection Practices Act requires that collection agencies can not be overly intimidating however this doesn’t stop them from calling. They’re just a bit more polite these days.
Your credit standing will be marred. Once you’ve defaulted on a short term loan it will be very hard to ever get one again, or any other type of loan for that matter, and though you may not deem this a big deal now it will inevitably follow you for the rest of your life until it is dealt with. Many of the smaller short term lenders will not report you to the three major credit agencies but they will report you to one of the smaller ones. The smaller ones are networked together so if you are reported to one, they will all know.
Another issue is that in many cases when you apply for a payday loan or cash advance loan you are required to leave a signed check for the amount of the loan with the lender. If you default your payments the check will be cashed and if there is not enough money in your account the check will bounce. Now you will have to pay penalties to your bank for the bounced check as well as late fees to the lender.
So, in essence, if you can not pay off your short term loan you will not be sent to jail. You may wish you had though.
