When it comes to payday loans, many people are left wondering if lenders can garnish their wages. The answer is not as straightforward as it may seem. A payday lender can only garnish your wages if you have a court order resulting from a lawsuit against you. If you don't pay your loan, the payday lender or a debt collector can usually sue you to collect.
A lender cannot go directly to your employer and request a wage garnishment. Only a court can order a levy for a payday loan.According to the Federal Trade Commission (FTC), the answer is no. For a lender to be able to garnish your wages, they must first be licensed in the state in which they are lending money. If they are licensed, they must file a civil lawsuit before a judgment can be entered and a garnishment ordered. Unfortunately, some lenders try to avoid due process by sending a levy to their employer without a court order.
Payday Alternative Loans (PALs) are installment loans that allow you to spread out your payments over time, making them easier to manage and often with lower interest rates than payday loans. Even if you file for bankruptcy, there is still little chance that the court will liquidate their assets to pay off debts. If you don't pay back your payday loan, lenders will start calling, sending letters from lawyers, and contacting the family or friends you used as references when you applied for the loan. If the loan was taken out in cash, it must be returned in cash. Some lenders have even gone so far as to file criminal complaints against borrowers using bad check laws and having complaints sealed by judges. Debt consolidation is another option for those struggling with payday loans.
It involves taking out a larger loan at a lower interest rate and using the funds to pay off higher-interest loans, leaving you with one more manageable monthly payment. The lender will attempt to cash your postdated check or make a debit from your bank account as specified in the loan agreement. At the end of the agreed loan period, the lender will continue to claim any outstanding amounts on your loan. Defaulting on a payday loan can result in bank overdraft fees, collection calls, damage to your credit score, a day in court, and wage garnishment. Fortunately, there is a limit to how much a lender can receive from a debtor through wage garnishment. You should never prioritize paying back the payday lender over putting food on the table or paying rent.
If you signed the salary assignment while applying for the payday loan, then it is legal for the lender to garnish your wages.