You can encounter a financial emergency at any given point. Sometimes the emergency is big and needs bulk money attention. On the other hand, some other emergencies you want smaller amount. What would you do in such kind of a case?
Let’s take an example here, you are a well sorted person and have everything planned in life including your finances. You have an emergency funds account, a couple of recurring deposits and a few fixed deposits. You think you are ready for any challenge which is making it on your way. You encounter something which is way out of your league and are in desperate need of cash. What do you do? You do the obvious; you break all your savings and deposits and accumulate all in one particular place. You notice that the money which is compiled will not be enough for the crises you are in. you immediately apply for a personal loan and learn that you are in the loan defaulter list and you won’t get a loan sanctioned.
You are in a mental breakdown phase thinking how will you arrange for the remaining amount. In this meanwhile one of your friends suggest you get a payday loan which is easy to avail. You immediately bank that option and get a payday loan.
But is getting a payday loan that easy? Let us just understand what pay day loans are and what are the consequences associated to it,
Pay day loans have simple application process. It is majorly used to get very short term loan and fewer amounts. The lender will just take a post dated check from you and expect you make the payment on your pay day as the name suggests. The interest rates are very high, higher than personal loans. Pay day loans are availed by people who have nothing left by end of the month and are in desperate need to cash.
You might have ample number of reasons to default a pay day loan like, delay in salary, emergency situation which needed urgent attention, etc. Make sure you do not default this loan as it has grave consequences. This loan default does not only hurt your cibil score, but will also hurt your chances to get a loan in the near future.
The bank will initiate automatic withdrawals as a term to recover their loan money. Not only this, you will be charged penalties on a daily basis which can accumulate more than what you borrowed on the first place. It will be a never ending process
You will start getting collection calls from various collection agencies to recover the loan amount. If you think you can dodge their calls and messages, be rest assured that there will be legal notices which will start flowing in.
No, absolutely not. You do not expect to land up in jail just for a small loan default, but yes there will be calls made to you on the same topic.
There are high chances that after trying a lot, they might want to settle and you may end up paying a lot less than you were suppose to pay on the first place. This transaction will remain on your credit report and you cannot expect your cibil score to go up in immediate time. It will be better to just make full payment and avoid settlements.
It’s better to keep your options open and get things sorted beforehand financially before you encounter this financial roller coaster.