Do I have to put up collateral for a payday loan?
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You don’t have to put up collateral like at a pawn shop, but you usually do need to provide a post-dated check or electronic access to your bank, credit union, or prepaid card account to pay off the loan at the end of the term.
Payday loans are considered a form of “unsecured” debt, which means you do not have to give the lender any collateral or put anything up in return. However, the lender will ask you for permission to electronically take money from your bank, credit union, or prepaid card account, or to provide a check for the repayment amount that the lender can deposit when the loan is due. Under federal law, however, they can’t condition whether or not they give you a loan based on whether you ‘‘preauthorized” automatic and recurring electronic fund transfers.
Keep in mind that if you don’t have enough money in your account when the lender tries to withdraw the payment, your bank or credit union will likely charge you fees for the check bouncing or for overdrawing your account. Depending on your state’s law, the payday lender may also be able to charge you an additional fee if your check or electronic authorization doesn’t result in the loan being paid.
Be aware, that if you do not have the funds and do not pay back the loan, the payday lender can sue you for the funds.
If you have problems with a payday loan or electronic authorization, contact your state regulator or state attorney general . You can also submit a complaint to the CFPB online or by calling (855) 411-2372.