Can You Be Legally Sued for Defaulting on Payday Loans
Harry August 2, 2022

 Payday loans are often considered the most feasible form of borrowing. These are the most sought-after loans in the UK for immediate and urgent assistance.

 If you have an urgent cash requirement and lack the same, you can borrow a small amount without engaging in the long-loan sanction process. Anyone could apply for payday loans regardless of their credit profile. These loans ease the deal to borrow a small amount within 15 minutes.

However, individuals searching for payday loans near me, unable to pay off the pending sum at the deadline, often roll it over to the next month. Payday loans come with that much flexibility. As these are collateral-free loans, lenders cannot claim any asset in this case.  

What happens if you miss payday loan payments?

When the payday loan paying day kicks in, you can either make a payment or set up an automatic payout or rollover. Individuals often prefer rollovers to set up automatic deductions. Therefore, in the wake of the spiralling debt cycle, one finds it hard to make up for payday loan repayments, which is a high-interest debt. One must explore all the options before searching for a payday day loan near me.

The lender, in this case, tries to get the outstanding balance from your account. It is possible in this case if you set up an automatic balance cut for repayments. If not getting the desired sum back, the lender charges a fee.

This fee spirals every time the lender gets nothing, increasing the loan costs. In non-automatic deductions, the lender may call the borrower to remind them of the funds. In the meantime, the fee, debt costs, late repayment fees, and penalties may increase the loan cost.

 The lender may then contact a third party, a debt collector. It may prove the worst scenario for the borrower.

However, he may not claim any asset in return but can take legal action if the issue becomes serious.

How does a payday loan works?

After exploring the different lenders, a borrower agrees to apply with the terms he finds suitable for his financial situation. He agrees with the lender and pays the repayment amount per the agreement. The lender frames an agreement highlighting the terms and conditions and the monthly payment to be made on the loan.

The time frame to pay off the loan is 30 days, and it is a 30-day loan cycle. One can roll it over to the next month if one misses it. But then, one may have to pay more owing to interest rates.

If the borrower wants, he could spread the repayments into affordable halves. However, to do so, one must act early. Because after entering into the cycle of payday loan debts, the lender may or may not agree upon the same.

  Can you be taken to court?

Yes, the lender may take legal action against the borrower in case of extreme circumstances. For example- If a borrower borrowed £500 for 30 day-cycle, but now it spiralled to £1500 or more, then the lender may take legal action against the borrower.

He may file a lawsuit and issue a CCJ ( County Court Judgement) against the borrower.

 Under this, the court decides whether you owe a higher debt percentage to the lender or not. If found guilty, the borrower must pay the borrowed amount to the lender in whichever way he can. The lender may share the upper hand here; he may garnish the wages, tap into another salary, or levy the bank account.

 A CCJ stays on your credit report for six years. Under this, you may not qualify for high-amount loans from high-street lenders. But, if your circumstances change and you become financially strong during the phase, you must inform the lender.

Clearing off the payday loan debt and CCJ will boost your credit score.

Can a borrower clear off a CCJ early?

If a borrower pays off the pending loan amount along with the interest rates and added penalties within a month of the CCJ issuance, he may walk free from a CCJ.

However, the borrower must file for a legal procedure before doing so. Here is what you need to do:

Apply for a “certificate of cancellation” at the County Court Hearing

The borrower must begin by filing for a certificate of cancellation at the court that holds the borrower guilty of the default. Fill out form N443 to cancel the default to file for this certificate. N443 certificate could be used as a certificate of cancellation or as evidence of making a complete payment towards the loan. The certificate issuer may charge £14 for the same. But you can get it for free if you are low on income.

After the legal verification, the authority addresses the registry Trust to remove your name from the register. However, it will still appear in your credit report. But any lender checking the register will know that you have been clear of the same.

As opposed to this, if you lose the opportunity to pay off the total amount within a month. The judgment will stay on your report for 6 years, which is 6 years from the original court judgment issuance.

How to get out of the payday loan trap?

Payday loans are costly. The interest rates can go up as high as 400% on loans. You must avoid searching for payday loans near me if you have other options. However, if you find yourself stuck in the payday loans debt cycle, you can do the below things :

  • You can consider revising your repayment schedule by contacting a lender.
  • Consider consolidating debt to pay it off early and at a reduced interest rate.
  • Avoid committing to any payday loans or high-interest loans for a while.

 You can file for bankruptcy or debt settlement if none of these options works. Consult a financial advisor to choose the right option for your situation.

Bottom line

Weigh the pros and cons of a payday loan before applying. These ways could help you deal with the payday loan debt trap. We here ensure the best payday loans and eliminate every trouble related to repayments with expert guidance and support.