Payday loans are short-term high-interest loans taken by people where they have to repay the full amount within two weeks or in other mutually agreed terms. Payday loans are easily accessible in the market as the only requirement for getting one is that one should have a valid id proof, a working bank account, and a source of income. If you have all of these, the loan is sanctioned in minutes and the money is obtained within a day, unlike the traditional loans which take many days. The borrower has to write an advance cheque with the due date of repayment as security. Know more about payday loans at https://tryascend.com/blog/3-month-payday-loans/.
If the borrower is unable to repay the loan, typically two things can happen either extension of time period in the loan or a court case.
Extending the repayment time
If you don’t repay your payday loans, then you will have to extend the time period of your repayment with the lender. The extension will cost you an extra fee which is the same as the original extra fee (the interest amount) on the borrowed sum. Experts believe that the inability to repay the payday loans starts a trend that ends up costing more to the borrower as the person pays more in interest than the entire borrowed sum. This happens because the payday amount is to be repaid in the lump sum which includes the borrowed sum and the interest amount (extra fee) and when a person is unable to repay the full amount, the extra fee will be collected by the lender at every extension thus prolonging the loan.
Lender can sue you in the court
One other situation where you are unable to pay even the extra fee will not result in the seizure of your valuables such as furniture or television but the lender can file a case in the court against you for defaulting the loan. Payday loans are unsafe loans for the borrower because the individual is not protected by the government or the banks. These loans are given irrespective of the credit score, which clearly displays the lenders do not care whether you can repay their loan, all they care about is whether you can pay the extra fee every month and trap you in their loan. Hence, their reputation of being a predatory loan.
Therefore, only apply for a sum that can be covered by your income otherwise you will incur more and more money as interest which in extreme cases can force you broke.