You can avoid paying payday loans legally by giving your bank a stop-payment order before the payment is due. You can also contact the payday loan provider and your bank or credit union to revoke authorization for automatic withdrawals from your bank account.
Keep in mind that revoking authorization from the payday lender does not cancel your debt, and the lender could pursue legal action or sell your debt to a debt collector if you stop making payments. Debt collectors report unpaid debt to the major credit bureaus, which could damage your credit score.
How to Avoid Paying Payday Loans Legally
- Notify the payday lender: You can send a letter to the payday company to notify them that you’re revoking their authorization to automatically withdraw money from your bank or credit union account.
- Notify your bank or credit union: It’s important to let your bank or credit union know that you’ve revoked authorization from the payday lender because some lenders may continue to withdraw funds from your account.
- Issue a stop-payment order: Even without revoking authorization, you can still stop an automatic payment from being withdrawn from your account. You can do this by giving your bank or credit union a stop-payment order. A stop-payment order must be submitted at least three business days before the payment is scheduled, and banks may charge a fee for stop-payment orders.
- Monitor your accounts: Lastly, you’ll have to monitor your accounts to see if any unauthorized payments are made. You can dispute any unauthorized payments to get your money back, as long as you notify your bank or credit union in time.
Payday loans come with insanely high rates and fees that can leave you in a cycle of debt, so they should only be considered as a last resort. If you need to borrow money quickly but want to avoid the drawbacks of a payday loan, check out WalletHub’s list of payday loan alternatives.
If you already have a payday loan that you’re looking to get rid of, the best approach is to negotiate a debt settlement agreement with the lender. This may prevent credit score damage and a potential lawsuit, giving you valuable peace of mind.
This answer was first published on 01/31/23. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.
FAQs
You can avoid paying payday loans legally by giving your bank a stop-payment order before the payment is due. You can also contact the payday loan provider and your bank or credit union to revoke authorization for automatic withdrawals from your bank account.
How to get out of paying a payday loan back? ›
Breaking free of payday loan debt
- Research organizations in your area that offer financial assistance.
- Reach out to a nonprofit credit counseling agency.
- Take out a small-dollar loan from a credit union or bank.
- Borrow money from a family member or friend.
How to stop automatic electronic debits
- Call and write the company. Tell the company that you are taking away your permission for the company to take automatic payments out of your bank or credit union account. ...
- Call and write your bank or credit union. ...
- Stop payment. ...
- Monitor your accounts.
Consider these:
- Use your credit card, if you have one. ...
- Ask family or close friends for a loan to float you to the next payday.
- Go to a local credit union, small bank or Community Development Financial Institution (CDFI) and borrow money at a more reasonable cost.
Can I close my checking account to try to stop a payday lender from taking money from it? Yes, but the payday lender will probably take collection action quickly.
What happens when people Cannot pay off a payday loan? ›
A lender can sue you for not repaying your payday loan as promised. Payday lenders report missed payments to the credit bureaus, which could cause a drop in your credit score. If a lender wins a lawsuit against you, it could garnish your wages to satisfy the debt.
How to stop payday loan garnishment? ›
5 Ways to Stop a Garnishment
- Pay Off the Debt. If your financial situation is dire, paying off the debt may not be an option. ...
- Work With Your Creditor. ...
- Challenge the Garnishment. ...
- File a Claim of Exemption. ...
- File for Bankruptcy.
Legal Ways to Block Payday Loans from Debiting Your Account
The two main legal ways to stop payday loans from debiting your account are through a stop-payment order or by revoking authorization for the automatic debits. It's important to remember that revoking authorization will not cancel your debt.
What happens if you borrow money and don't pay it back? ›
Late payments and accounts in default can stay on your credit reports for seven years, meaning you may face financial consequences for years to come. 3 Not only will your credit score be hurt, but lenders that see this information on your credit reports are much less likely to approve you for a new loan in the future.
How do I stop relying on payday loans? ›
Here are the steps to stop and escape the cycle:
- Create a Personal Budget. ...
- Contact the Payday Loan Lender. ...
- Consider Opening a New Bank Account. ...
- Plan Ahead for Emergency Expenses. ...
- The Bottom Line with Payday Loans – Ask for Help If You Need It.
It is hard to both repay a payday loan and keep up with normal living expenses, so payday loans often force borrowers to take out another high-interest loan, over and over again. Thus, payday loans often lead to repeat loans—at very high interest rates.
What happens if you don't pay back Dave? ›
What Happens if You Don't Have Enough to Pay Back Your Cash Advance? If you don't have enough money in your linked bank account when Dave comes to collect, they'll take whatever is available and keep automatically withdrawing partial payments until the amount is settled.
How do I protect myself from payday loans? ›
These steps will help protect you when getting a payday loan.
- Shop around before you sign anything.
- Make sure the lender gives you a copy of the agreement.
- Make sure the lender gives you a cancellation form.
If you provided account authorization to the payday lender, you can tell your bank to stop payment. Your bank won't issue any scheduled or future payments to the lender. Be aware, though, that banks usually charge a fee for stop-payment orders.
What happens if you don't pay back cash advances? ›
The Potential Consequences of Not Paying Back a Cash Advance
The most imminent potential consequence of defaulting on a cash advance loan is that the lender will put you into collections.
What happens if you never pay back MoneyLion? ›
Additionally, not repaying your cash advance from MoneyLion won't hurt your credit since it's not a loan. However, you won't be able to take out any other advances until you repay outstanding balances.
What happens if I stop payment on a payday loan? ›
Because of their short-term nature, payday loans can be challenging to pay back on time. If you don't pay back your loan, the payday lender can send your loan to collections or take legal action against you. You may pay hefty fees for not paying on time, and your credit score can be adversely affected.
What happens if you don't pay back cash advance apps? ›
If you fail to repay your loan on time, you may face late fees, overdraft fees, or even account closure. Lack of consumer protection: Cash advance apps are not regulated by the same laws and rules that apply to traditional lenders, such as banks and credit unions.
