What Happens If You Close Your Bank Account and Default on a Payday Loan
- The Risks of Defaulting on a Payday Loan
- What Happens If You Close Your Bank Account?
- How to Avoid Defaulting on a Payday Loan
If you close your bank account and default on a payday loan, there are a few things that could happen. The lender may try to cash the check, which could lead to overdraft fees. They may also contact you to try and collect the debt.
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The Risks of Defaulting on a Payday Loan
Defaulting on a payday loan can have a number of consequences. The most immediate consequence is that you will no longer have access to the money you borrowed. This can leave you in a difficult financial situation if you were depending on that money to pay for essential expenses. Defaulting on a payday loan can also lead to a damaged credit score, making it more difficult to borrow money in the future. In some cases, you may even be sued by the lender.
You Could Be Sued
If you default on a payday loan and close your bank account, the lender may sue you. If they win, they can collect the full amount of the loan, plus interest and fees. They can also garnish your wages and put a lien on your property.
Your Wages Could Be Garnished
If you default on a payday loan and fail to repay the balance, your lender may pursue legal action against you. In some cases, this could result in your wages being garnished. This means that your employer would withhold a portion of your paycheck and send it directly to the lender to repay your debt.
wage garnishment is a legal process that allows creditors to collect debts owed by requiring employers to withhold money from an employee’s paycheck. Wage garnishment happens when you fail to repay a debt, such as a credit card balance, personal loan or medical bill. The creditor will then contact your employer and request that they withhold a certain amount of money from your paycheck each week until the debt is paid off.
While wage garnishment is typically used as a last resort, it is still a legal way for lenders to collect debts. If you are facing wage garnishment, it is important to understand your rights and options.
You Could Be Facing Criminal Charges
In most states, if you default on a payday loan by not paying or by closing your bank account when the lender tries to deposit your loan, you could be charged with a felony offense. The charges vary by state, but they are usually a felony charge, punishable by imprisonment for up to two years, and in some states you could be fined as well. In addition to being charged with a crime, you could also have a civil judgment entered against you for the amount of the loan, plus interest and court costs.
What Happens If You Close Your Bank Account?
Your Loan May Be Transferred to a Collection Agency
If you close your bank account and default on a payday loan, your lender may transfer your loan to a collection agency. This means that you will have to deal with the consequences of having a collection account on your credit report, which can include:
-A lower credit score
-Difficulty getting approved for new lines of credit
-Higher interest rates on future loans
-The possibility of wage garnishment
You May Be Charged an NSF Fee
If you close your bank account and default on a payday loan, you may be charged an NSF (non-sufficient funds) fee by your lender. This fee is usually between $15 and $30, and it may be charged for each instance that a payment is returned unpaid. In addition, the lender may report your default to the major credit reporting agencies, which could damage your credit rating.
Your Credit Score May Suffer
If you close your bank account and default on a payday loan, your credit score may suffer. In addition, the lender may report the unpaid loan to the credit reporting agencies, which could further damage your credit score. If you are having difficulty making payments on your payday loan, consider talking to your lender about other options, such as extending the repayment period or refinancing the loan.
How to Avoid Defaulting on a Payday Loan
If you have a payday loan and you close your bank account, the lender will try to debit the amount you owe from your account. If there are insufficient funds in your account, the lender will likely try again on the next payday, which could lead to multiple overdraft fees from your bank. To avoid this, you can either keep your account open and make sure there is enough money to cover the loan, or you can set up an automatic payment from another account.
Create a Budget
If you’re thinking of taking out a payday loan, it’s important to understand the risks involved. One of the biggest dangers of defaulting on a payday loan is what happens if you close your bank account.
Most payday loans are set up as direct deposit loans, meaning that the money is automatically deposited into your account on the day it’s due. If you close your account before the loan is due, you’ll be considered in default and will be subject to all of the fees and penalties associated with defaulting on a loan.
Defaulting on a payday loan can also lead to damage to your credit score, making it more difficult to get approved for credit in the future. If you’re struggling to make ends meet, it may be better to look into other options such as borrowing from family or friends, or getting a personal loan from a traditional lender.
Consider a Debt Consolidation Loan
If you’re struggling to repay a payday loan, you might be able to refinance the debt with a personal loan from a traditional lender. This could help you get a lower interest rate and monthly payment, giving you some breathing room to repay the debt. Just make sure you’re able to afford the new payments before moving forward.
Talk to Your Lender
If you’re struggling to repay a payday loan, the best thing to do is talk to your lender as soon as possible.
Your lender may be willing to work with you to extend the time you have to repay the loan, or they may be able to offer you a revised payment plan. If you default on a payday loan, you may also be charged additional fees by your lender.
It’s important to remember that defaulting on a payday loan can have serious consequences. Not only will you be charged additional fees by your lender, but your failure to repay the loan may also be reported to the major credit reporting agencies. This can damage your credit score and make it more difficult for you to obtain credit in the future.