What happens if you don’t pay a payday loan

The first days: debits, fees and calls

Most payday loans are repaid with a post-dated check or an authorization to debit your account on the due date (CFPB ↗). If the money is not there, the lender may present the payment again, and your bank or credit union may charge a non-sufficient-funds (NSF) fee each time. The lender may also add a late or returned-check fee where state law allows (CFPB: payday loan costs ↗).

The CFPB found in its payday research that repeated attempts by online lenders to debit a borrower’s account can add significant costs (CFPB ↗). That is why stopping a debit you cannot cover, and talking to the lender, matters more than waiting.

The rollover offer

If your state allows it, the lender may offer to roll the loan over: you pay only the fee, the due date moves, a new fee is charged and you still owe the full balance. On a $300 loan with a $15-per-$100 fee, paying a $45 rollover fee leaves the $300 plus another $45 due later — $90 in fees for four weeks of borrowing (CFPB example ↗).

Ask instead about an extended payment plan. Some states require lenders to offer one, sometimes at no extra cost.

Collections and your credit

An unpaid loan can be passed to a debt collector or sold to one. Under the Fair Debt Collection Practices Act, collectors cannot harass you, and they must give you validation information about the debt (CFPB ↗). Ask for that notice before you pay anyone who calls about an old payday loan.

Payday lenders do not always report to the major credit bureaus, but a collection account or a court judgment can still follow you. If credit damage is your main worry, read how loans affect credit.

A lawsuit and garnishment

The lender or a collector can generally sue for the money you owe. If it wins, or if you do not respond, the court enters a judgment, and the creditor can then ask for a garnishment order against your wages or bank account (CFPB ↗). Without that court order, a payday lender cannot garnish wages; some threaten it anyway.

Details are in can a payday lender sue you.

Can you be arrested?

No — you cannot be arrested for defaulting on a payday loan. But if you are sued and ignore a court order to appear, a judge may issue a warrant (CFPB ↗). If a lender or collector threatens arrest, report it to your state attorney general and state regulator, and you can file a complaint with the CFPB.

A typical sequence, and your move at each step

The order and timing differ by lender and state. This is a general pattern, not a schedule.

What to do before the due date

1. Call the lender now and ask for an extended repayment plan or other options. Whether you get one depends on state law and the lender’s policy (CFPB ↗).
2. Protect essentials. Rent, utilities and food come before an unsecured loan. If a debit would empty your account, you have the right to revoke the authorization — the debt still remains.
3. Get help. A nonprofit credit counselor or legal aid office can review your options; servicemembers can contact their JAG office (CFPB ↗).
4. Do not take a second payday loan to pay the first. CFPB research found that almost 70% of borrowers take a second payday loan within a month (CFPB ↗). See how to get out of payday debt.

Questions

Will not paying a payday loan go away after a few years?

Every state has a statute of limitations for lawsuits, which differs by state and type of debt. After it expires, a collector cannot sue or threaten to sue, but in many states can still ask you to pay, and a payment or written acknowledgment may restart the clock (CFPB ↗).

Can I just close my bank account?

Closing the account stops debits but not the debt, and the lender can still pursue collection or a lawsuit. Revoking the authorization and asking for a payment plan is usually the better first step.