Payday loans stay in the system for up to 7 years
If it is reported to the three major credit bureaus (Experian, Equifax and TransUnion), it will appear on your credit reports for seven years.
The payday lender might send your loan to collections. Then there will be more fees and costs. If you do not pay the debt while it is in collections, the collection agency might try to sue you to get what you owe. To avoid collection actions, try talking to the manager of the store where you got the payday loan.
Then, the collector may report the collection account to the credit bureaus. The collection account will appear in the public records section of your credit report. This account can only remain on your credit report for a set time – seven years from the date the original account became delinquent.
A debt doesn't generally expire or disappear until its paid, but in many states, there may be a time limit on how long creditors or debt collectors can use legal action to collect a debt.
In general, most debt will fall off your credit report after seven years, but some types of debt can stay for up to 10 years or even indefinitely. Certain types of debt or derogatory marks, such as tax liens and paid medical debt collections, will not typically show up on your credit report.
The amount of time that a debt collector can legally pursue old debt varies by state and type of debt but can range between three and 20 years. Each state has its own statute of limitations on debt, and after the statute of limitations has expired, a debt collector can no longer sue you in court for repayment.
Old (Time-Barred) Debts
In California, there is generally a four-year limit for filing a lawsuit to collect a debt based on a written agreement.
The statute of limitations on payday loans—the legal time frame that a lender can sue you for an unpaid debt—varies by state and typically ranges from three to six years.
There is no program for loan forgiveness or cancellation after seven years.
You may be taken to court
On that note, you can be sued for not paying back a payday loan, even if the loan amount is small.
Failing to pay could result in your account going into default, the balance being sent to collections, your lender taking legal action against you and your credit score dropping significantly.
In addition to incurring more fees and interest, a payday lender may report nonpayment to credit bureaus, impacting your credit score. If you're unable to meet your debt obligations on a payday loan, be proactive and request a payment plan or debt settlement.
Importantly, all existing state databases are operated by a single company, Veritec Solutions. In addition to running the payday lending systems, Veritec has been the primary advocate for creating these databases.
Approximately 91 percent of borrowers are unable to repay their payday loans at the end of a term.
No, unpaid payday loans won't just go away. Defaulting on a payday loan will likely result in your debt getting sent to collections, which can stay on your credit report for up to seven years, and you could be sued until the statute of limitations for your unpaid debt ends.
The FDCPA is one of the most important laws protecting your rights as someone who owes money. Not only does it make threats illegal, but it also bans other forms of creditor harassment.
The limitation period for collection of debts is 6 years from the date the debt became payable and after that time they may become statute barred. This means that the debt is no longer recoverable, including by legal action in the courts. However, it is always worth checking that your debt is actually statute barred.
Debt collectors are not permitted to try to publicly shame you into paying money that you may or may not owe. In fact, they're not even allowed to contact you by postcard. They cannot publish the names of people who owe money. They can't even discuss the matter with anyone other than you, your spouse, or your attorney.
Under the Fair Credit Reporting Act (FCRA), most negative information, including unpaid credit card debt, must be removed from your credit report after seven years. This seven-year period typically begins 180 days after the account first becomes delinquent.
Yes, federal student loans may be forgiven after 20 years under certain circumstances. But only certain types of loans are eligible for forgiveness, and you must be enrolled in a qualifying repayment plan. You'll also need to stay out of default on your loans.
If you continue not to pay, you'll hurt your credit score and you risk losing your property or having your wages or bank account garnished.
If the statute of limitations has expired, you have the right to refuse payment without facing legal consequences. In most cases, credit bureaus will no longer report a debt if it has passed seven years since the date of first delinquency, meaning that a 10-year-old debt likely won't impact your credit score anymore.