What Happens If I Close My Bank Account And Default On A Payday Loan?

Do you want to know what happens if you close your bank account and default on a payday loan? Read on to find out.

Receiving a payday loan can be an enticing alternative when you wind up needing fast money. There’s ordinarily no credit check and you can have cash in your grasp surprisingly fast. You essentially hand over a post-dated check for the measure of the credit in addition to charges and premium, or approve a charge from your financial balance on the date of your next payday. In any case, in the event that you need your next check to deal with other, must-take care of tabs, a payday advance can transform into a monetary sand trap on the grounds that the loan costs and expenses are frequently extravagant.

If you want to know about what happens if you close your bank account and default on a payday loan, then you have come to the right place. We have collected all relevant information to help you find the answers to all your questions and a lot more. So, what are you waiting for? Without much further ado, let us jump right in!

What is a payday loan?

Payday loans are a method for momentary obtaining that ordinarily doesn’t need a credit check. Credits are expected inside 14 days or when you get your next check, which is the reason they ordinarily are called payday loans. The probability of defaulting on a payday loan is extremely high. As indicated by an investigation, half of payday credit borrowers default on a payday loan in the span of two years of taking out the principal advance.

In case you’re needing some quick money to make it to your next check, you might be contemplating taking out a payday credit. This might be especially obvious on the off chance that you don’t have the best credit and can’t get endorsed for different kinds of advances. While it’s anything but difficult to get a payday advance, this financing choice is over the top expensive.

What happens if you don’t pay back a cash advance loan?

Payday credits accompany over the top loan costs and charges that regularly make them hard to reimburse. In the event that you can’t take care of a payday advance, the record might be sent to an assortment organization, which will harm your credit.

A payday advance default can prompt a blast of bank overdraft expenses, steady assortments calls, harm surprisingly scores, a day in court and garnishment of your check. Try not to figure it can’t occur on the grounds that you obtained just $300. Neglecting to take care of a payday advance accompanies various genuine results, including:

Extra fees and added interest

Contingent upon where you live and which bank you pick, you may confront additional expenses in case you can’t reimburse your payday advance. These expenses are alluded to as non sufficient funds (NSF) and are charged when you do not have the assets to cover an exchange.

Debt collection activity

Your moneylender will endeavor to gather installment for you for around 60 days. In case you can’t pay them inside this time period, they’ll probably go to an outsider obligation assortment organization. You can expect the obligation assortment office to call you and send you letters consistently until they get the cash. You’ll see that their assortment endeavors are unmistakably more forceful than those of your bank.

Bank withdrawals

Payday loan specialists don’t sit around idly when the cash you owe is expected. They’ll promptly start programmed withdrawals from your ledger in the event that you’ve given them access as a component of the advance arrangement. On the off chance that the charges don’t experience, they may break the rush into littler lumps trying to separate whatever cash is in your record.

Ruined credit score

On the off chance that you reimburse your payday advance on schedule, your FICO rating shouldn’t be influenced. Then again, in the event that you default on your credit and your debt is set in the possession of an assortment office, you will see a huge decrease in your score. Thus, damaging your credit score.

Court summons

Even on the off chance that you defaulted on a modest quantity of cash, quite possibly an assortment organization will indict you. Contingent upon where you live, this may prompt liens against your property and even compensation garnishment.

Hardships in finding future financing

Since a payday advance default can remain on your credit report for as long as seven years, you may make some intense memories getting endorsed for different advances not far off.

Arrest threats

Although it’s illicit for a loan specialist to undermine you with capture or prison, they may do so at any rate. In the event that you get this kind of danger, make certain to counsel your state lawyer general’s office immediately.

What should you do if you cannot pay your payday loans?

Things may look depressing and just not very good on the off chance that you can’t pay your payday credit. However, you must remember that you are not out of alternatives. The key is to not disregard the credit. Follow these tips.


Borrowers can utilize their bank’s selfish means for their potential benefit. Debt collecting offices give payday banks just pennies on the dollar to purchase their obligation accounts. In the event that the borrower opts for non-payment before the records become delinquent, at that point the moneylender won’t get anything. Subsequently, a borrower can contact their loan specialist and offer to pay a bit of the obligation. Doing so might be sufficient to carry the moneylender to the arranging table. Borrowers ought to get any arrangements recorded as a hard copy. They ought to guarantee the repayment contract expresses that the debt will be decreased to zero.

Check your state’s rules and laws

Check if your moneylender is an individual from the Community Financial Services Association of America. The CFSAA requires its individuals to offer extended payment plans. These installment plans coerce loan specialists to give borrowers regularly scheduled installment plans without any rollovers. On the off chance that the moneylender isn’t a CFSAA part, check your state’s laws. A few states make all payday banks offer EPPs. Others boycott or limit rollovers. Some have even banned payday advances totally.

Look for community assistance programs

Food and shelter, in addition to an individual’s other basic needs are the top priority. Borrowers can search out network help projects to assist them with covering the rudiments.

Work with a non profit loan advisor

Nonprofit and charitable credit advisors offer the public free budgetary counsel. They assist borrowers with improving their cash and board abilities and evade bankruptcy while managing their obligation. They can likewise offer counsel on moving toward dealings with banks. Be that as it may, they will most likely be unable to haggle for the borrower’s sake — payday moneylenders frequently decline to work with credit advocates. Likewise, borrowers should keep an eye out for tricks. Like payday loan specialists, credit directing tricksters go after the monetarily helpless.

Work with an obligation union loan specialist

Borrowers can utilize obligation union advances to take care of high-intrigue obligations and improve their installments. Exchanging obligation for obligation isn’t ideal, yet an obligation solidification credit can assist break with liberating of the pattern of payday advance rollovers.

Can I close a bank account if I have a loan?

Although a basic call or visit to a bank or credit association is typically everything that is required to close a bank account, doing so just to stay away from assortments on a payday loan can bring about some hefty repercussions. When a moneylender finds that a borrower has shut their ledger they will most likely make a fast move.

At the point when clients get a payday advance, they tend to leave an individual cheque with their financer. While some actually do with physical loaning areas, it’s presently more normal for borrowers to allow online banks to charge cash legitimately from their financial records. In the event that a bank account is shut, the financier may attempt to take money from a borrower’s cheque or electronically charge cash from the account. This could cost the borrower overdraft expenses or handling charges for the shut account.

On the off chance that any of these activities don’t work, the moneylender can start assortment exercises. Collection organizations commonly make use of ceaseless calls to attempt to contact their objectives. It is additionally conceivable they will attempt to sue borrowers in court.

So as to abstain from confronting assortment organizations — or in any event, shutting a ledger in any case — borrowers should attempt to talk to their moneylender and try to work out a middle ground. Disclosing to their moneylender why they can’t repay a payday loan may allow borrowers some kindness. It’s consistently conceivable a payday credit senior supervisor could postpone the due date for payment or an installment plan for reimbursing the loan.

Because of these reasons, shutting a bank account should not be a choice that is made hastily.  Moreover, opening another ledger can be troublesome once a borrower shuts a past account since certain banks will not open accounts for clients that already owe cash to another bank. In the event that a payday financer has pulled back such a lot of cash that a borrower has a negative parity, at that point a bank may even decline to close the record until the parity is paid off.

In lieu of shutting a record, borrowers can rather put a stop for them. A solidified record will acknowledge stores, for example, checks, however won’t license any withdrawals. Accordingly, payday moneylenders will be unable to pull back assets from a solidified record.

Borrowers could likewise put a “hard block” against a specific payday advance financer. Like freezing a store, a “hard block” banishes a particular business from making electronic withdrawals. So as to do this, a composed letter is needed to be sent to the moneylender advising them that they no longer have consent to make withdrawals. Normally, this will agitate financers who may charge a corrective expense for attempting to impede their withdrawal endeavors. Also, banks may charge expenses per each mentioned “hard block.”

How do I stop payday loans from debiting my account?

On the off chance that you have applied for and gotten a payday credit on the web, you probably consented to have the installments consequently pulled back from your financial balance. You reserve the privilege to stop the programmed withdrawal before it happens. You can do as such by:

  • informing the payday moneylender to stop taking the payments
  • informing your bank to stop payment on the withdrawal
  • record a complaint with the consumer financial protection bureau
  • close the bank account

Informing the payday moneylender to stop taking the payments

You can stop the programmed installments by advising the payday bank to do as such. Here’s how you can do so:

  • confirm the directions in the ACH approval
  • adhere to the directions in the ACH approval
  • give a duplicate of the letter to your bank

Informing your bank to stop payment on the withdrawal

Your bank is needed to stop installment on an automatic withdrawal in the event that you notify them and give them a time of three business days. Informing your bank by telephone within the time frame of three business days is adequate to stop the exchange, yet your bank may likewise necessitate that you set up your solicitation as a written record in the span of 14 days. Numerous banks have online structures that you can finish to stop the withdrawals. Most banks will charge you an expense for halting installment.

It is significant that you give your bank precise data about the date and measure of the exchange. On the off chance that conceivable, you ought to furnish the keep money with a duplicate of the ACH Authorization. In the event that anytime you are uncertain if what you’ve done is adequate to stop the exchange, talk with your bank.

Record a complaint with the consumer financial protection bureau

Record a complaint with the Consumer Financial Protection Bureau (CFPB) if you experience any of the following:

  • the ACH Authorization doesn’t indicate how to stop programmed withdrawals
  • the payday moneylender won’t stop withdrawals after you advise it to do as such
  • the bank permits a withdrawal after you inform it that you repudiated approval for the withdrawal
  • the bank didn’t stop installment after you mentioned it to do as such.

The CFPB is a government office that implements guidelines pertinent to payday moneylenders, banks, and other budgetary establishments. The CFPB will work with your moneylender or bank to determine your objection. You may present a grumbling by visiting the CFPB site. Recall that halting programmed withdrawal of your installment doesn’t mean you don’t need to pay the credit. You should attempt to arrange other installment courses of action with your loan specialist to keep away from your record heading off to an obligation authority.

Close the bank account

You should close your ledger to stop the exchanges just if all else fails. You may need to do this if:

  • you can’t manage the cost of the stop installment expense.
  • your payday moneylender doesn’t react to your solicitation to stop the withdrawals
  • you don’t have the opportunity to tell your bank to stop the withdrawal

Moreover, you ought to talk with your bank regarding whether this is vital.

If I close my bank account what happens to my direct debits?

A bank would not assist you with moving direct charges from them, to another supplier. You can get your parachute supplier to deal with the exchange cycle (in the event that they offer such administrations), and your current bank is lawfully needed to make a move and give them the subtleties they demand. What’s more, you can likewise deal with it yourself by advising the beneficiaries regarding the D.D’s of your new ledger subtleties.

In the event that they do choose to close your record, you will get enough notification to ideally resolve these issues at that point. You shouldn’t have to move them to the parachute account on the off chance that you would prefer not to right now.


Payday credits are intended to tie individuals over until their next check. However, they can put you in danger of more noteworthy budgetary peril. Consider a transient credit a final retreat for genuine monetary crises. After you look at your choices for a momentary advance, cautiously audit the terms and states of the credit, posing inquiries to determine any worries you have. Furthermore, research the notoriety of the moneylender you’re thinking about before marking any agreement.

Sandra Johnson

Sandra Johnson

Sandra Johnson was a few years out of school and took a job as a life insurance agent in California, selling coverage door-to-door for Prudential. The experience taught her about the technical components of insurance and its benefits for individuals and society, as well as the misunderstandings people often have about insurance. She has over ten years’ experience in the insurance industry, having worked as both a Broker and Underwriter, assisting clients across a broad range of industries. At Insurance Noon, Sarah diligently gathers all the required information and curates up pieces to provide meaningful insurance solutions. Her personal value proposition is to demonstrate a genuine interest in always adding value for clients.Her determined approach to guiding clients has turned her into a platinum adviser to multiple insurers.