What Happens if You Cannot Repay Your Payday Loan?

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If you cannot repay your payday loan, there may be some added late fees and your credit score could be negatively impacted. Therefore, as soon as you realise that you are struggling to repay your loan or cannot make an upcoming repayment, it is important to speak to your lender as soon as possible who may be able to give some options to ease the pressure.

It is estimated that around 20% of customers are unable to repay their payday loans overall, with around 33% missing the first payment. Whilst payday loans can be an important lifesaver when you need emergency funds, they carry higher interest rates than your average loan and therefore you must take caution when you find yourself in a position where you cannot repay.

You may find that a payday lender offers you rollovers, extensions or additional loans on top, but this can lead to a dangerous spiral of debt if you take on too much.


What Does The Lender Do If You Miss Repayment?

When a repayment is missed, lenders initiate a sequence of contact, starting with emails, SMS and phone calls. If there’s no response, they may escalate to sending letters, involving bailiffs, and, in extreme cases, pursuing a court order.

Lenders often persistently attempt to collect repayment, even if it’s for a small amount such as £5 or £20.


The Implications of Non-Repayment Include:

  • A default fee which is maximum of £15 according to the FCA
  • Daily interest continues to run – capped at 0.8% per day
  • Your credit score will be negatively impacted
  • It can be harder to get future loans

These implications are explained in more detail below and emphasise the importance of addressing repayment challenges as soon as they arise:


Default Fee

If you miss a payment, you may incur a maximum late fee of £15. This increases the overall cost of your loan and makes it more challenging to settle your debt promptly.

Added Interest For Every Day The Loan is Open

Daily interest continues to accumulate for each day your loan remains open and unpaid. This added interest can significantly escalate the total amount owed.

Negative Impact To Your Credit Score

Non-repayment significantly affects your credit score. A lower credit score makes it more difficult to secure loans, credit cards or favourable interest rates in the future, impacting your overall financial health.

You Could Be Referred To a Debt Collection Agency

Your loan could be sent to a third party debt management or collection agency who will independently chase up your debts, through emails, letters and phone calls. They are hired by the lender and paid a fee on the success of any funds they recover. Whilst they operate within the legal guidelines, it is not ideal to have another company follow up.

Harder To Access Future Loans and Credit

A damaged credit score poses a significant obstacle when seeking future financial assistance. Lenders are likely to view individuals with a history of non-repayment as higher risks, limiting your ability to access loans and credit in the future.



Can I Go To Court For Not Paying Back a Payday Loan?

It is unlikely, but there is a small chance you could go to court for not repaying a payday loan. If the debt has built up over time and maybe you have multiple loans outstanding with the same or different lenders and plus, you have not responded to any emails, calls or letters, there may arrange a court order as a way to get your attention and provoke some kind of response. If you went to court, it means that you would have to turn up or face more civil prosecution – and your loan would still be outstanding plus some late fees.

If you went to court, it could be as part of a CCJ (a county court judgement) which is a formal way to acknowledge your unpaid debts and stays on your credit report for 6 years.


Can I Go To Jail For Not Repaying a Payday Loan?

No, you will not go to jail for failing to pay back a payday loan. It will simply be recorded on your credit report as ‘bad debt’ and in addition to the late fees and negative impact to your credit score, it may be harder to get approved for future loans, mortgages and credit cards when you apply in the future.


What Should I Do If I Cannot Repay My Payday Loan?

Speak to your lender immediately who may be able to help. At the end of the day, lenders are companies looking to make a profit and they need to recover the money they have lent out to you.

A lender could therefore offer you:

  • An arrangement (repay in smaller amounts over a longer period)
  • Freeze repayment and delay it for a future date
  • Offer a rollover or extension – but be cautious as this can get pricey
  • Waive the default fee if you tell them early
  • Give you an extension with no added interest
  • A way to make a partial payment without adding any extra charges