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Payday Loan Debt Advice
If you have debts of over £5000, you may be able to write off your debt with an IVA

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Don’t suffer in silence. We’re here to help. 

It all seems so simple, doesn’t it? You’re in urgent need of money, and payday is in a couple of weeks. Then you see the answer to all of your problems in an advert; the payday loan. You get the money you need, wait until payday, and return it.

Unfortunately, payday loans aren’t that straightforward, and many people fall into the same trap. These companies are everywhere, and they can cause significant damage to your finances.

If you find yourself in that situation, don’t suffer in silence. Our advisers can help you repay your debts and ensure you never have to deal with these companies again.

The Truth About Payday Loans

A few years ago, a payday loan would be an emergency payment that you’d pay back within a week or a month, and many people still believe that’s the case now. The Financial Conduct Authority (FCA) has made many changes to protect consumers, including a cap on interest rates and charges.

Now, people can pay their loans back within six months, but there are still plenty of reasons to avoid one of these loans.

They’re the last resort

Most people understand that payday loans aren’t exactly reputable and turn to them when they can’t source another loan. If a person can access a better financing solution, they will – so payday loans aren’t all they’re cracked up to be.

High interest rates

While the interest rates on payday loans are now regulated, they’re still high and unaffordable for a lot of people. The FCA’s new rules state that payday loan providers can only charge up to 0.08% interest per day. However, high interest rates mean many people can’t meet the repayment terms. If you have to borrow money, other personal loans will probably be more convenient.

The never-ending cycle of debt

If you cannot repay your initial loan, you’ll probably take out another loan to pay the first one-off. Then you’ll have to pay the second loan off, and – you get what we mean. It can turn into a destructive cycle of debt, and you might have a real battle on your hands if you want to get out of it.

Do You Owe Money To Payday Lenders? Here’s What You Need to Know

When you take out a payday loan, you’re entering into an agreement with the lender, and your responsibility is to repay that amount. If you can’t, you’ll get into severe debt and – as mentioned previously – the never-ending cycle that ensues.

Continuous payment authority (CPA)

In many cases, entering into an agreement with a payday lender means giving them your bank account information. The lenders can then take money out of your bank account until you repay the loan.

Continuous payment authority agreements are similar to direct debits, but you have less control. For example, you can easily cancel a direct debit and know how much money will go out of your account every month.

With the CPA, your lender controls how much money they take, and you won’t even get any notice.

The lenders can only try to take money from your account twice, but if they’re unable to recover your debt, you’ll face higher interest rates and further action.

The rollover trap

One way payday lenders try to get more money out of you is to offer you a rollover. If someone cannot pay their loan back, a rollover gives them an extra month, but it comes with higher interest rates and additional fees. Also, you’ll still need to pay the initial loan amount back, so it’s not a great option.

Dealing With Payday Loan Debt

Nobody means to get into debt, and it’s a common problem – especially in these difficult times. However, the worst thing you can do when you’re in trouble is to ignore it and hope your lenders will go away.

There are ways you can repay the loan, and stricter enforcement from the FCA means you now have more options.

Speak to the loan company

Lenders have a legal obligation to support you when you’re in debt, regardless of whether you can pay the loan back.

Your lender should:

  • Offer to suspend the debt recovery process if you’re working out a repayment plan

  • Signpost you to debt advice agencies that can help

  • Be willing to receive smaller payments

  • Not harass you

Find ways to deal with your debt

Many people believe that cancelling their ongoing repayments will buy them some time, but this can create problems with your lender – especially if you don’t make them aware of what you’re doing. One way to smooth things out is to assure the lender you’re getting help for your payday loan debts, but be aware that they’ll continue to add interest until you repay all of your debt.

Consider an IVA

If you’re unable to pay back a payday loan, it’s best to seek help from a free debt advice agency. The agency can advise you on the best solutions and negotiate with the payday lender. There are many debt solutions, but an individual voluntary arrangement is a popular option.

The benefits of an individual voluntary arrangement

An IVA is a legally binding agreement that you and your creditors enter into. It ensures that they’ll get their money back, and you’ll have some breathing space. Most lenders are interested in recovering the original loan amount, so they’ll agree to the IVA terms. During your agreement period, the interest rates will freeze and your creditors won’t be able to contact you directly. Your insolvency practitioner will handle the negotiations and ensure you stick to the agreement.

The disadvantages of an IVA

While an IVA offers many pros, there are some cons too. When you enter into this legally binding arrangement, you have to stick to a set of rules set by your insolvency practitioner. For example, if you receive a windfall or an increase in income, that amount should go towards paying off your debts. An individual voluntary arrangement will impact your credit score, and you’ll have to seek permission from your practitioner if you want to take out a loan. However, once you reach the end of your agreement, you’ll be able to rebuild your credit score.

Things To Consider

There’s no simple answer when dealing with an unpaid loan, and any debt solution will come with strings attached. If you fall into the payday loan trap, the vital thing to remember is you can get out again. The best thing you can do is seek debt help as soon as possible. Once you choose the right solution for your needs, you can focus on paying back the money and rebuilding your credit score. Taking out another loan is like putting some sellotape onto a leaking ceiling, but an IVA can reduce your money worries and get you back on track.

Get free debt advice today

If you’d like to discuss your debt, please don’t hesitate to contact us for some free advice. Our debt specialists work with you to ensure you can say goodbye to unreasonable interest charges and solve your debt problems.

Please get in touch with our friendly team today.