Can You Go To Prison For Not Paying Back a Payday Loan?

No, you never go to prison or jail for missing repayments for a payday loan or failing to pay back the loan at all. 

With the typical payday loan from a direct lender amount at around £300, the full loan amount plus interest is likely to be around £420-£450 and this is not a substantial amount to result in an individual going to prison.

However, it is important to know what the consequences are if you default on your payday loan and miss repayments. 

Typically the outcome is that you will incur late fees, a negative impact to your credit score and it could make it harder to access loans and credit in the future. In extreme cases, you could end up in court as the lender attempts to collect repayments from you, but this is costly for the lender and very rare.

If You Don’t Go To Prison For Missing a Payday Loan – What Does Happen?

If you miss your payday loan repayments, the outcomes are typically:

• Follow up emails, SMS and calls from the lender’s debt collection team
• Letters from the lender to follow up on missed repayment
• The lender will continue to try collect from your account at various times (limited to a certain number of times per day and per week)
• A one-off default fee (maximum late fee of £15)
• A negative mark against your credit file, often causing your credit score to fall
• It will be harder to be accepted for other credit cards, loans and financial products in the future
• You may receive letters from the lender to follow up on repayments
• You could receive a visit from a bailiff to chase up your defaulted loan in person

If your repayment is expected on a certain date, such as the 30th of the month and that payment fails, you will usually receive a follow up email and SMS from the lender letting you know that your payment has been declined. 

Importantly, you will not be charged any late fees, such as the £15 default fee, right away. The lender usually gives you 24 to 48 hours to make the payment without incurring any additional fees. This is because common reasons for missed repayments are that the borrower is still waiting for their income from work to clear and sometimes people have charged their debit card details and this needs to be updated.

Once the dust settles and payment has not been collected, you will be charged a default fee and the daily interest will continue to be charged for every day the loan is outstanding. This is where the loan gets costly because if your loan is still open for another 15 or 20 days, you will be charged daily interest, usually around 0.8% per day and this potentially adds another £30, £50 or £100 to your overall loan sum.

The lender may take stricter measures to follow up on your debt, including the use of letters, hiring a debt collection agency to contact you or even sending a bailiff to follow up in person.

Can Missing Payday Loan Repayment Result in Jail Time?

No, missing a repayment for a payday loan will never result in jail time or going to prison. Missing a payment or failing to repay a loan, credit card or mortgage is not a criminal offence, but will result in unwelcome consequences such as damage to your credit score, increase the cost of your loan and make it very difficult to borrow money in the future – including mortgages and even mobile phones.

There are other types of loans or debts that could in jail time such as:

• Not paying criminal fines
• Child allowances
• Council taxes

Could I Go To Court For Not Repaying My Payday Loan?

It is very unlikely that you would appear in court over missed payday loans because it is costly for the lender to do so.

If the lender believes that they have a case and the loan amount that they wish to recover is large enough, they could make a court order. But since payday loans are small amounts and not known in this industry, it is incredibly unlikely. 

What Should I Do If I Have Missed a Payday Loan Repayment?

• Speak to the lender – The best thing you can always do in this scenario is speak to the lender because ignoring them and not playing ball will only encourage them to ramp up the methods to contact you and try to get some kind of repayment. By speaking to the lender, you can discuss why it is you cannot repay and very often, you can come to an arrangement which might involve paying off the loan over a longer period of time in smaller amounts – and they may remove the default fees or freeze recurring interest to help you. So don’t be shy, pick up the phone!

• Contact a debt charity – If you are struggling financially, there are a number of free debt charities who can offer free advice and ways to manage your existing debts and how to get the payday loan repayments out of the way. Consider speaking to the likes of StepChange and Citizen’s Advice Bureau for free help.

• Use a debt management company – If you have lots of outstanding debts, including credit cards, personal loans and more, a debt management company can help you organise these more efficiently. They will usually write to every lender and prepare settlement figures to help pay each one off. This can be an effective way to get debt free, but it can mean holding yourself to a very strict budget for quite a few years and the debt company often takes a fee on top, so you need to weigh this up.