In situations that compel you to obtain quick cash in the form of a payday loan, you can quickly become financially stressed if you are unable to pay off the amount on time. In the case of payday loans, the creditor wouldn’t be checking your credit record. So, you can instantly receive the amount and use it for the respective purpose.
Now, if you are unable to pay off the loan, you would obviously be in panic. Moreover, you would have to shell out penalties and fines, along with a high interest rate. In these situations, you might think of closing your bank account after withdrawing all your savings.
However, have you thought of the consequences if you go for this route? Let’s look at the outcome of closing your bank account and defaulting on your payday loan.
Closing your bank account: The possible outcome
Although you can close your bank account after taking a same day cash loan or payday loan and defaulting on it, the process might be complicated. Firstly, you would withdraw your money and then close the account. Next, you might decide to open a fresh account. When your creditor submits the check, they would get it returned. The bank would inform them that the account no longer exists.
The creditor would keep your actions in record. Eventually, they would report your financial irresponsibility to the credit bureaus, and your profile will get an adverse banking record attached to it. When the new bank comes to know about your financial mismanagement in the previous bank, they might hold your account or close it.
Also, when you fail to repay the payday loan on time, you invite the risk of debt collectors harassing you at your office or home.
What alternate way of action do you have?
Considering the adverse effect of closing your bank account, you might opt for some of the viable alternatives in case you default on your payday loan.
- Request to block the check
You might put forward a request to your bank so that they block the check that you have provided to the creditor. For this, the financial institution would levy a small charge from you. This way, you can prevent the amount from being debited from your account. In this situation, your money would be in your bank, but you would still be responsible to pay off the money to the lender.
- Talk to the creditor
You can decide to discuss your financial adversaries with your payday loan creditor. Often, when you talk things out logically, you can get a viable solution. In case they are considerate, they would extend your payment data by a month or so. At times, they can also lower the rates of interest. So, when you discuss your situation with the creditor, they might help you ease up your financial stress.
Closing your bank account after defaulting on your payday loan wouldn’t be the wisest option. However, if you don’t have any other alternatives, you can close the account and brace up for the adverse consequences.