What happens if you can’t pay back payday loans on time? This question has been asked over and over again. There are several actions that can be taken if someone doesn’t have the ability to, or simply refuses to payback a cash advance loan.

These companies are very high risk for non-payment, more so than loans for cars or houses since they are so small. Often time’s people will come into the company with previous check stubs for a cash advance while they are no longer employed. They have been fired, and lie about their employment status. Or simply people will close out their checking accounts, and never go back and make the payment needed.

Because of those two issues these companies charge very high interest rates during the first few days or weeks that a loan is made. If payment is late then interest will continue to be added to the loan until payment is made. If the loan is not repaid in a timely manner, then sometimes loan companies will deposit the check that has been given to them.

Unfortunately, sometimes people will write bad checks making sure that they close out their bank accounts, or don’t have the proper amount of funds in the account. If this happens then the company will often try to reach the borrower by letter, or phone call. If this fails then the company will use what is called a collection agency.  Collection agencies will often try to contact the borrower to work out a payment agreement via snail mail and telephone. If this fails then legal action can be taken in the court system to try to collect the amount due, plus interest gained during the time period it has taken to go to court. This can often take several months, to even years bring the debt to hundreds of dollars more than the original balance.