Well, the first thing first and the truth is you can never be sent to jail for not repaying a loan for it is not a criminal offence. To tell you the truth it is even illegal for a lender to threaten borrowers in one way or another but in practice things are a little different. In order to understand what can actually happen if you fail to repay a short-term loan let us first consider what these loans actually are and what legal consequences may follow in case of default payment.
What are quick online loans?
These loans are available in many different names like payday loans, quick cash loans, Instant Cash Loan etc. but by nature they are all unsecured type loans that means the borrower is not required any guarantor or collateral to avail these loans. As a matter of fact, the only criteria for being eligible for these loans are one need to have a secured income, valid identity and a bank account. That means almost anybody with a fixed income can find these loans easily available.
But there are also a few things that you should keep I mind about these loans and they are
- These loans are normally available for a period not more than a month
- Being unsecured in nature they come with high rate of interest
- There is limit on the maximum loan amount and in most cases, it is not more than five hundred dollars.
What happens if you default?
If you fail to repay your loan on your next pay day as it is the norm with payday loans or Quick Loan the best thing to do is to get your loan extended for another month by paying a fee and pay it out the very next month and get out of the loop. But what happens if you keep failing to repay?
Well, every month the loan amount will keep increasing with compounding interest and for the first few months the lender might persuade you to pay the loan or then they can transfer the loan to a third-party loan recovery agency. Now things can turn a little bitter as they will try to bring you to a settlement with the lenders in every possible way – some legal and some we may term as close to legal.
After all these things if you still continue defaulting payment the lenders can actually drag you to the court and once you are proven a defaulter you may be forced to repay the loan by selling your property or part of it. No consider all these hassles for mere five hundred dollars? It really doesn’t worth it. Defaulting payday loan can not only bring your already low credit score further down but it can also bring unnecessary harassment and tension for a trifle of money.
If you were really forced to take any short-term loan, make sure that you pay the loan back in time for, they involve very high rate of interest and you can actually end up paying more interest than the amount you have actually borrowed. This is a situation you should always avoid.
