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Payday Loan Debt Help & Advice

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Financial emergencies happen. Sometimes people find themselves needing to pay for something, and realising they don’t have to cover the cost. That’s when some turn to payday loans – a short-term form of borrowing that offers a quick cash injection, but can also come with severe long-term consequences.

In this guide we’ll explore payday loans, including what they are, the dangers of relying on a payday lender, and how you can get the support you need if you fall into payday loan debt.

What are payday loans?

Payday loans have long been a topic of debate. Designed to be a stopgap between paydays, they’re a risky, quick-fix form of lending that are widely advertised, highly accessible, and make it all too easy to fall into financial bother.

Often aimed at people who are already in some level of financial difficulty, payday loans are marketed as a quick way to have money sent to your bank account via a direct money transfer.

When it comes to interest and charges, however, payday loan firms tend to find ways to hide the details in the fine print.

Payday loans are infamous for their high interest rates. While the cost of interest on payday loans is regulated by the Financial Conduct Authority (FCA), the interest rate can still reach above 1,500%. By comparison, the rate

Because of the high rates of interest, people with a payday loan to pay often struggle to settle their debt and can end up with debt collectors chasing them. Payday lenders take your bank card details when you apply, so it’s not unusual for them to help themselves to money directly from your account.

Are payday loans regulated?

A mentioned, interest rates on payday loans are capped by the Financial Conduct Authority in order to protect borrowers from the most predatory payday lenders.

Payday lenders themselves also agreed to a customer charter in 2012 to offer consumers a base level of protection.

Unfortunately, those measures haven’t prevented people from struggling to repay the loan amount they owe to lenders, and many subsequently end up with a debt problem.

This link between payday loans and debt means payday lending continues to be among the most popular topics of complaint to the Financial Ombudsman Service, the UK body responsible for settling financial disputes.

In most cases, money experts will recommend against taking out payday loan debt, and suggest you look at alternatives to payday loans.

If you’re already considering taking out a payday loan, you may be in a financially vulnerable position – and if that’s the case, things can quickly go from bad to worse.

The dangers of payday loan debt

A payday loan can be tempting when you’re strapped for cash and payday is further away than you’d like. But if you can’t keep on top of repayments, it will only cause you problems and can lead to you falling into a vicious cycle of debt. Below are some of the main dangers linked with payday loans.

Extremely high interest rates

Payday loan companies are well known for charging the highest interest rates possible. Not only that, but if you can’t pay back the loan in the agreed timeframe, it can lead to penalties and more fees being piled on.

Thankfully, with new laws in place to control unruly loan companies, these costs have been brought down slightly. Interest rates on payday loans have now been capped at 0.8% per day and the borrower will never pay more than double the amount they borrow.

Short windows to pay back a payday loan

Although there are some companies who will give you a few months to repay your payday loan, these are usually an exception to the rule. Normally what will happen is that you will need to pay back the loan in full at the end of the month or on your next payday.

It’s often the small print that catches people out when it comes to payday loans, and it isn’t always easy to meet the deadlines you’re given. It can become a cycle of needing more loans to pay off the ones you already have, and not keeping up with your payments will lead to being charged fees and penalties that will only add to your problems.

Continuous Payment Authority (CPA)

In many cases, when you apply for a payday loan online, you’ll be asked to give the company access to your bank account or credit union for payments. What many people discover later is that the company is taking payments from their account when they aren’t due.

In some cases, your bank information may be shared with hundreds of other companies and they may attempt to take hidden fees straight from your bank account.

What happens if you can't pay back a loan to a payday lender?

With a payday loan, you’ll agree to borrow a certain amount of money over a short period of time – £250 over 20 days, as an example.

By signing up for the loan, you’re also agreeing to the interest and charges set by the lender, and will be expected to pay back what you owe in full and within the timeframe.

Because payday lenders have direct access to your bank account, they will often attempt to take the amount you owe directly from your account on the day the payment is due.

If you can’t afford to repay, or there’s no money in your account, lenders will keep trying until they recover the full amount.

That’s the challenge for people struggling to pay their payday loan – lenders will continue attempting to take loan repayment from your account until they are successful, no matter whether the money in your account is set aside for other essential outgoings like food and utilities.

For every time you’re late with a payment, payday lenders will hit you with a late payment charge (usually around £20). The longer you leave it, the more you will owe.

Lenders have also been known to farm out individual debt to debt collection agencies, so its not outside the realms of possibility for a debt collection agency to turn up at your home.

Are payday loans a good idea?

We’d always advise avoiding payday loans. It’s far better to explore other, less risky options first, like tightening your belt for a month, or borrowing from a close friend or family member.

Payday loans can cause significant damage to your finances and wreak havoc on your credit score if you lose control of repayments.

It can also be highly challenging to get any relief from paying them off. If the loan company hasn’t broken the terms of your contract, your chances of having any debts forgiven are slim.

As such, the best course of action is to avoid the temptation of payday loan debt altogether.

Where can I get debt advice and more information about payday loans?

Payday loans are often targeted at people with existing financial problems, and the combination of extremely high interest rates and steep missed payment charges can force people into a cycle of debt they struggle to get out of.

Creditfix helps people stop that cycle. As the biggest debt solutions provider in the UK, we have a team of debt experts who are experienced in protecting people from payday lenders, and we can even deal with lenders on your behalf so you don’t have to.

If you’ve found yourself in over your head with a payday loan company and you need help or advice, send us an email at enquiries@creditfix.co.uk, or call today for free debt advice – our phone number is 0808 253 3288.