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Help if you’re struggling to pay back a payday loan

Make sure you’ve claimed everything you’re entitled to

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Make an emergency budget

If you’re worried about cashflow, take a look at what you’re spending and what income you have coming in.

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You can also look at ways to reduce your household bills, such as switching providers for your gas, electricity or mobile phone contracts.

What to do first if you’re worried you won’t be able to afford your next payday loan repayment

If you’re going to struggle to make payments, it’s important you talk to your lender or provider as soon as possible. There are things they can do to help, even if you can no longer apply for a payment holiday.

If you’re still having money troubles because of the coronavirus outbreak, you might still be able to apply for a payment holiday (also known as a payment deferral) under certain conditions.

If you haven’t taken any holidays on your payday loan yet, you can apply for a payment holiday of up to one month. However, it’s important to continue to make payments if you can afford to.

The deadline to apply for a payment holiday has been extended to 31 March 2021.

If you need longer than a one-month payment holiday

Lenders must work with you to understand how likely you are to restart your payments if you take a payment holiday.

If you need more time, they should consider suspending, reducing, waiving or cancelling any further interest or charges. This could include allowing you to:

  • further defer your payments, or
  • make reduced or token payments.

Ask for a reasonable period of time to allow you to recover from the financial impact of coronavirus, regardless of whether your account is in default or arrears.

If you don’t contact your lender, they’ll normally follow this process:

  1. They might ask you to get in touch by writing to you or calling.
  2. They’ll then issue you with a written ‘default notice’. This gives you an opportunity to arrange how to catch up with your missed payments.
  3. If you don’t deal with the debt, the loan will ‘default’. This will usually be after two to three missed payments.
  4. When the loan has ‘defaulted’, more interest and charges could be added.
  5. If you still haven’t responded, your lender might seek a County Court Judgment (CCJ). This is called a decree in Scotland. A CCJ gives your lender more options to enforce repayment of the debt. Bear in mind that these measures can affect your ability to get credit with other lenders in future.
  6. The debt may be sold on to a debt collection agency who will make contact and ask for payment, however they are not allowed to visit the property and remove goods. If the debt is still not paid following the issuing of a County Court Judgement (CCJ), the creditor can seek to obtain a warrant of control and instruct enforcement agents (also known as bailiffs). It is only at this stage that some goods can be levied and removed to pay towards the debt.

If you tackle the problem early, there’s far less chance that any of this happening.

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What to do if you can’t pay back your payday loan

If you’re struggling to pay back a payday loan, the worst thing you can do is ignore the problem.

Here are the steps you can take:

Step one - contact your payday lender as soon as possible

By law, they must:

  • direct you to sources of free and independent debt advice
  • suspend recovery of the debt for a reasonable period if you’re developing a repayment plan with a debt adviser or on your own
  • treat you fairly and with consideration, allowing you reasonable time to repay the loan which might include freezing interest and suspending charges.
  • not bombard you with phone calls, emails and text messages
  • consider accepting small token payments temporarily if your repayments mean you haven’t enough money left for essentials such as food, rent or mortgage, and utility bills.

Remember to keep copies of all emails and letters you sent to the lender and write down details of your phone calls to them. This is evidence of how you’ve tried to contact them if they don’t reply and you need to make a complaint.

Step two - what to think about before cancelling the recurring payment

There is a risk with cancelling a recurring payment that the company is going to charge you a cancelled direct debit fee.

It's a good idea to talk to your bank or lender about options for keeping up with payments before you do anything. You can also ask them about what will happen if you do cancel and if there'll be any fees or charges.

If you still decide to cancel, do it at least one day before repayment is due. Make sure you tell your lender you’ve done so.

Write down the date and time that you instructed your bank to cancel the recurring payment.

If after this date money goes from your account to the lender, complain to your bank. The bank must give you a refund by law.

It’s a good idea to follow up your phone call with a letter to your bank.

Make sure you tell the payday lender as soon as possible that you’ve cancelled the recurring payment because of difficulties paying back the money.

You’ll still owe the debt and the lender can go on charging interest and fees so it’s important you get free debt advice to help you deal with the problem.

Step three - refuse to roll your loan over

Your payday lender might suggest that you ‘roll over’ your loan for another month or so. This is a bad idea.

It means you have to pay even more charges and interest – so you end up owing much more money.

Instead, get debt advice and consider available options for dealing with your debt.

Before rolling over your loan, the payday lender must signpost you to free debt advice.

Step four - get help from a free debt adviser

If you’re struggling with bills or finding it difficult to deal with a payday lender, contact one of these free, confidential debt advice services:

The adviser will be independent and acting on your best interests – they’ll help you get your debts under control and can negotiate and discuss all options with the lender on your behalf.

Tell your lender as soon as you start working with the debt adviser. Follow up your phone call with a letter.

When you’ve done this, your lender must give you a reasonable amount of time to come up with a repayment plan before using debt collectors.

If they keep contacting you while you’re working with the debt adviser, send an email asking them to stop.

Other points to remember

Your payday lender shouldn’t try to put you under undue pressure, including:

  • calling you at work without your permission
  • discussing your debt with your employer or family members
  • refusing to deal with the debt advice service acting for you.

Next steps if you’ve missed a payment

If you’ve missed a payment, contact your lender to explain your situation. Try to avoid taking out more credit unless you know you can afford to pay it back.

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When to get debt advice

Have you already missed more than one payment and are not able to come to an agreement with your lender? Then it’s best to get advice as soon you can, especially if you’ve got other debts as well.

Make sure you pay off priority debts first. These are debts such as mortgage or rent arrears, and fuel bills.

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How to complain about a payday lender

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The lender then has eight weeks to resolve the situation.

If they don’t meet this deadline or you feel that they haven’t answered your complaint properly, you can complain to the Financial Ombudsman Service.

For help making your complaint, Resolver is a free online service and app that offers consumer advice and simplifies the process of complaining.

Using the Financial Ombudsman Service

The Financial Ombudsman Service is an independent service that deals with unresolved complaints about providers of financial services.

If they judge that the payday lender hasn’t resolved your complaint properly or has treated you unfairly, they can order the lender to pay you compensation.

Extra support if you’re struggling financially and with your mental wellbeing

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Having mental health issues might mean that you struggle to make the best money-based decisions for you, as well as act on them.

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Remember, if you’re struggling financially and with your mental wellbeing, it’s worth getting in contact with your bank, building society, lender or whoever you owe money to, to discuss your options.

However, picking up the phone and talking about your problems is often easier said than done when you’re struggling with your mental health. 

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Most places that you owe money to have policies about supporting you if you’re vulnerable. But they can’t help you unless you ask.

For some general tips on how you can manage your mental health visit Rethink It covers everything from setting a budget to getting help if you, or someone you care about, is having a mental health crisis.

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Looking for us? Now, we’re MoneyHelper

MoneyHelper is the new, easy way to get clear, free, impartial help for all your money and pension choices. Whatever your circumstances or plans, move forward with MoneyHelper.

Continue to website
Looking for us? Now, we’re MoneyHelper

MoneyHelper is the new, easy way to get clear, free, impartial help for all your money and pension choices. Whatever your circumstances or plans, move forward with MoneyHelper.

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