Payday Loan Default

Before you continue reading, do you know what a payday loan default is? Do you have an idea of what to default a loan is? Oooh, you don’t. That is not a problem anymore. Let me give you some details on payday loan default.

A payday loan is a short-term type of loan usually paid within the next salary date. In simple terms, it’s in most cases paid off after a month. It is mostly known for its high interest. The good thing about the loan is the fast approval time, loan granting, and availability. Just google the words ‘short term loans that are near me’ and you’ll find tons of options to choose from payday loan default.

How Payday Loans Work

Before applying for any payday loan, it is important you read on the privacy policy to determine if you can comply with them. Check on the repayments terms, interest rates involved, loan term, and method of payments. 

In case there is an issue that needs further clarification, ask the lender about it. He/she is eligible to disclose adequate information to the customers. When applying for a payday loan, you’ll be required to fill out an application form. 

Before filling this form, you’ll be obliged to have the following documents:

  • Proof of stable income
  • An active bank account
  • Proof of residence
  • National ID

Once, you have these documents, you can fill out the form, submit it and wait for a response. The response time normally takes a few hours or minutes depending on the payday loan lender. 

Once, your loan is approved, the cash will immediately be sent to your bank account. In some cases, physical payday loan lenders may grant you the loan in cash.

Also, be careful when dealing with online payday lenders. Some may lure you to cases of scamming or conning. Make sure the lender you are dealing with is licensed and has a reputable business operation.

Statistics show that about 4% of Canadian families with debt have at least one member that took a payday loan in the last three years.

How Payday Loans Work


Laws Governing Payday Lenders in Canada

If you are residing in the Canadian region, you may be pleased to know that there are various measures governing payday lenders. These laws are based on the Consumer Protection Ontario which is a public organization that aims at promoting consumer rights.

Some of these laws include:

  • Payday lenders are not supposed to charge more than $15 per $100 borrowed by the consumer.
  • Loan rollover is not allowed meaning you cannot access another payday loan without completing the payment of the first one.
  • A payday lender must disclose specific information on the contract’s first page. This information includes the amount eligible to be borrowed, the loan term, and the interest involved.
  • A borrower has TWO business days to cancel the loan without any penalty or reasoning.
  • Failing to meet the set policy terms will lead to the rejection of the loan.
  • In case you fail to pay the loan on the due date, the lender is supposed to contact you no more than three times a week. Note that this does not incorporate the use of emails.
  • Payday lenders cannot grant you a loan that is more than 50% of your net salary.
  • If you take out three loans within 63 days, the payday lender should give an option of extended payment.
  • In case of missed payment, the payday lender should not use threatening language. If this happens, you should report him/her to authorities concerned like Consumer Protection Ontario.

Laws Governing Payday Lenders in Canada


What Happens If You Don’t Pay the Payday Loan Back?

Although payday lenders have been regulated by the state, that doesn’t mean that there are no consequences of missed payments. Failing to pay the loan may lead to:

#1 Additional Late Payment Fees

Late payments will lead to additional charges on top of the loan and the interest rates concerned. Imagine paying a loan with high interests and being added other costs on top. How will you deal with all that stress?

#2 Additional Fees from Your Bank

When you default the payments, the lender will try as much to withdraw money from your account if you grant them access during application.

If there is no money in your accounts, the lender will still try to withdraw the money. The bank will be charging for insufficient cash every time the lender makes a withdrawal attempt. This increases the fees involved.

#3 Can Lead to Bank Overdrafts

If the bank supports overdrafts, the lender will withdraw all the money you have plus an excess if the money is inadequate which leads to a bank overdraft. This will happen only when you grant the lender permission to access your account during the application.

That is why it is important to read the privacy policy first before applying it to any lender.

#4 Constant Calls

Have you ever been called severally by someone who bores you? I know that feeling. That is what you’ll be feeling when getting the calls from the lenders. The lenders in the Canadian region are however limited to three calls per week.

Also, the lender is not supposed to use threatening language for communication.

#5 Nuisance to the Referrals

The people you used as referrals or next of kin will be subjected to the calls in case the borrower is not found. This will be a disturbance to them.

#6 You Will Be Referred to a Collection Agency

If you still fail to pay back the loan, the payday lender will turn to a collection agency to deal with you. One thing to note is that the actions of a collection agency will be harsher than that of a lender.

#7 Your Credit Score Will Drop

Failing to pay the loan in time or missing payments will leave a negative mark on your credit report making it even harder to get a loan in the future. You’ll end up in a cycle of borrowing high-interest unsecured loans.

Credit Score Will Drop

#8 The Lender Can Sue You

As the last option, the lender can take you to court for default. You will not be jailed for this. But if the judgment is made against you, you will have to pay the loan plus the interests, additional fees, and court charges.

It’s best that when sued, you ask for help from a legal advisor.


There are several negative consequences you’ll meet if you fail to pay the loan. To help, try talking to a professional for assistance or consider consolidating the loan or using a loan transfer method.