So you got a payday loan – here’s how to avoid getting into debt
Short term, high interest loans, otherwise known as payday loans, are a real bone of contention in the financeindustry. They are often a last resort for people who aren’t able to get credit on better terms, but people might also take them out when they only need to borrow a small amount, or need the cash in your bank account very quickly. They have been subject to legal ruling in the past, with the most prominent payday loan service, Wonga, going into administration when it had to pay customers back because it hadn’t made terms clear enough. There are now far more regulations for short-term lenders, and they need to make clear how much you’ll end up paying back. It’s also now more common for repayments to be spread over a number of months, rather than the whole amount being collected from your bank account when you get paid.
Do you have a minus account? Do you need some money? You may review exclusive loan offers from BridgePayday. You get your money provided for free. You can, for example, use the money to balance your account, for new furnishings or to buy a car.
These types of loans are a very expensive form of borrowing, with interest rates (APR) in excess of 500%. When you compare that to the (still high) example APR of 40% for an overdraft, you start to see how high that figure really is. One lender gives the example of £480 borrowed over nine months, and the amount payable is £959.04 – very nearly double. In addition to this, they can be severely frowned upon by mortgage lenders, and make it more difficult to borrow in future.
If you’re considering getting a payday loan, it’s well worth looking at your other option – there’s a wealth of information about zero or low percentage credit cards, overdrafts, credit unions and money transfers on moneysavingexpert.com. If you’re already in one, here’s how you can proceed to stay out of any trouble:
Make your payments on time
Defaulting on a payday loan can lead to mounting fees and rising financial stress, so missing payments is not something to be taken lightly. Make sure that you know your payments schedule, and that you’re able to leave enough cash in your account to cover the repayments. Even better, if you can save to pay off the loan early, it’s worth seeing if you can negotiate an early settlement with reduced interest.
Take action if things get difficult
If you suspect that you won’t be able to make your repayments, or your circumstances change and you’re left short, don’t waste time in taking action. If you have a friend or family member who could help you out in the short term, this is one of those situations where it might be wise to ask for help. If not, you will need to let your lender know, and see if you can renegotiate your payment terms. If the thought of this brings you out in a cold sweat, charities like StepChange and CAP can guide you through the process, or even negotiate on your behalf to make things more affordable and take a bit of the pressure off.
Don’t let them get away with bad behaviour
Any lender has a duty to give you good, clear customer service and to be upfront about payment terms. If there have been communication or service issues, or you believe that your loan was mis-sold – i.e. you could never have afforded it, or the terms weren’t made clear – you can complain to the Financial Ombudsman Service. This is a free service that rules on whether or not a lender has acted fairly, and you can sometimes get compensation if your loan was not dealt with correctly.
You have a right to Breathing Space
Under new regulations brought in by the government, you can get 60 days respite from legal action by your lender if you have problem debt, including a freeze in any interest or fees payable. This can provide some much-needed time to stop panicking, gather your thoughts and look at what help is available to you. You’ll need to access it through a registered debt advisor, or a charity, or a mental health professional if your debt has caused a mental health crisis. In this latter instance, your breathing space time lasts for as long as your crisis period, plus 30 days.
Payday loans are not usually the best way to borrow, and are one of the easiest ways for debt to become a problem if they’re not carefully managed. But if you already have one, and are worried about making repayments – or how much it’s costing you – there are options available to you, so don’t despair.