Payday Loan


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Payday loans offer a quick way to borrow cash for an unexpected expense. Maybe you have a furnace that suddenly died and is beyond repair, or maybe your septic has failed and needs to be replaced immediately. If you lack the cash, a payday loan is one way to get the cash you need without waiting weeks or months for your loan to be approved. If you’re on social security, payday loans for social security recipients are also possible. There are things to be aware of, however.

How a Payday Loan With Social Security Works

With any payday loan, you give your social security number, name, and contact information. As soon as you submit it, your loan is processed and approval is given in a matter of minutes. You do not need to fill out multiple pages on an application, as you would with a bank or credit union, and there is no credit check to slow down the process. It’s fast and easy, but you also need to enter into a payday loan with social security wisely.

Pay Close Attention to the Fees

People with social security as their sole income do not have excessive income to spend. If you take out a payday loan to cover an emergency, you have a short period in which you will pay the money, plus fees and interest, back. If you do not pay on time, additional interest and late fees can quickly become a huge financial burden.

Some payday loan companies will charge upwards of 200% or 300% in interest if you do not pay the money and fees back on time. Say you borrow $500 for two weeks, and there is a $75 fee for that money you must pay the $575 back at the end of the two-week. If you don’t have the extra $75, you face even higher fees, negative notices on your credit report, and dealings with collections.

Taking out a payday loan on social security can be a good option, but only when you've exhausted all other options. Ask friends or family for a loan, talk to SSA about an emergency (expedited) payment. If those turn out to be not possible, then look into payday loans with social security and compare rates and payment terms carefully.

What You Must Know About Your Payday Loan and Your SSI Benefits

Per the Social Security Administration, taking out a loan is perfectly acceptable, providing you spend all the money you borrow. If you fail to spend the entire amount, your monthly SSI limit is reduced by the amount you didn’t spend.

For example, if you take out a payday loan for $1,000 and only spend $800, your next month’s SSI benefit is reduced by the difference of $200. If you have a limit of $2,000, you’ll only receive $1,800.

Don't loan the excess to get out of this restriction. Loaning money to a friend or family member also counts against you. Don't borrow more than you need when taking out a payday loan with social security. If you do end up with extra money, spend it or, if possible, pay off a chunk of your loan early and prevent having your SSI benefits reduced.

What Happens if You Don't Repay a Payday Loan?

One question people wonder is if you can go to jail for not repaying a payday loan. That is not going to happen. When you haven't repaid, the loan company will start asking you to pay up. If you don't, they may sell your information to a debt collection agency. Their job is to get you to pay the money that's owed. Debt collection agencies may use unfair tactics that are illegal.

When debt collection calls start coming in, the collection's agent may threaten you with jail time. You should know your rights and protections. Per the Fair Debt Collection Practices Act, debt collectors cannot do these things.

  • Call you before 8 a.m. or after 9 p.m. without your permission.
  • Tell you you owe more than you do.
  • Claim to be attorneys.
  • Send information by a postcard that others could read.
  • Contact you if you send a certified (return receipt) letter telling them you want the contact to stop.
  • Tell you they'll have you arrested.
  • Place advertisements to sell your items in order to get you to pay.
  • Require you to pay more interest or fees other than what is in the contact or legal per your state's laws.
  • Threaten or try to take your property unless your state's laws allow it.
  • Use threatening or obscene language.
  • Call you multiple times a day to get you to answer or to annoy you.

If they do violate any of the terms set in the Fair Debt Collection Practices Act, you can contact a lawyer or your state's attorney general and file a complaint.

The debt collection agency will give you a chance to repay the loan. They may even negotiate a lower amount by offering to drop a fee or lower interest to a certain point. If you still do not repay the payday loan, they can take you to court. If you're sent a court order to appear, go to court and do whatever is required. If you ignore the court order, a judge could issue an arrest warrant for failure to appear.

Can a Payday Loan Company Garnish My Wages?

If a payday loan company takes you to court and wins, the court will enter the judgment against you that states how much you owe. In order to make sure you do pay, a wage garnishment order may be placed. If that happens, your employer is instructed to withhold a certain amount of your pay to pay off your debt. Some forms of income are exempt from wage garnishment. Those forms of income include Alimony, child support, disability, retirement, and Social Security.

Should a payday loan company say they have a judgment against you for wage garnishment, ask to see proof. If you're not aware of it, it's likely a lie to get you to pay. If it is valid and the garnishment will strain your ability to afford basics like housing, food, and water, talk to the court. Wage garnishment exceptions are possible based on your income level.

Do Payday Loans Hurt Your Credit?

If you take out a payday loan and don't pay it back, it can end up on your credit report. That will hurt your credit score. The payday loan company won't send your loan and repayment information to the credit bureaus. If you pay back the loan on time, it will never touch your credit score. If you don't repay it and a debt collection agency steps in to collect payment, they may report it. If they do, you'll end up with a credit score that's lowered by your unpaid loan.

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