What happens if you don’t pay back a payday loan?

Before you take out a payday loan, it’s very important to fully understand the terms. Payday loans have high penalties because the lender is taking a large risk by lending to people without running credit checks. Different lenders have different approaches when you do not repay your payday loan on time. Some lenders will allow you to “roll it over” so that the loan is extended. Although you do not have to pay off your loan right away, fees will keep accumulating until you do. Lenders will continuously try to take the money from you until you are able to fully pay back what you owe. As soon as you have problems repaying your loan, talk to your payday lender and try to arrange a viable repayment plan.

It’s also a good idea to check whether your payday lender is a member of a trade body such as the Consumer Finance Association, the Finance and Leasing Association, the Consumer Credit Trade Association or the BCCA. Many of these associations have a charter where its members have to follow stringent rules, such as:

a) Tell borrowers how the loan works and the cost of the loan before they apply
b) Freeze interest and charges if they make repayments under an agreed and reasonable repayment

Debt collection
If you have not paid back your loan within a certain amount of time, the payday lender may pass your case onto a debt collection agency. This can be stressful as you are likely to start receiving a lot of letters, phone calls, and even home visits demanding the money.


If your payday lender is using aggressive debt collection practices, or you think you’re being unfairly treated, you can write a complaint stating why you think the lender is not adhering to the Office of Fair Trade’s irresponsible lending guidance. If you do not receive a satisfactory response within eight weeks, you can escalate your complaint to the free and independent Financial Ombudsman Service, which settles disputes between lenders and consumers.