Payday Loans can seem like a great way to solve a short term financial problem. Typically though it only delays the inevitable and causes you further problems a month later.
In this guide I take a look what you can do when you can’t afford to pay back your payday loan.
You can’t afford to pay your payday loan and want to know how to stop payment
In most cases your payday loan payment will be collected using your debit card. If you know that it won’t be possible to repay your payday loan then you can do something to stop payment. You have an agreement with the payday lender known as continuous payment authority. What this means is that the payday loan lender has permission to debit your debit card for the amount owed.
It is possible to stop continuous payment authority, although it is slightly more difficult than cancelling a direct debit. I have written a guide detailing how to cancel continuous payment authority. and it is well worth a read. On that page you can also find a link to the downloads page for an example letter to cancel continuous payment authority you can use as well.
It is worth remembering that by not paying your payday loan several things may happen: –
- You will be charged for missing the payment.
- The missed payment may be recorded on your credit file.
- The Payday Loan lender may call you or write to you to chase the outstanding balance.
After you have cancelled the payment for your payday loan
The next step is to think about how you are going to repay your debt with the payday loan lender.
You can visit the debt advice page to get help with your debts, especially if you have a few of them. On that page you will find details of several debt help organisations. StepChange are a good place to start. If you only have one payday loan debt and no other debt then see below.
Alternatively you can look at our guide which explains how to set up a payday loan repayment plan. Useful if you only have the one payday loan debt or maybe two.
Will the payday loan repayment plan be accepted?
It is possible that you may struggle to set up an arrangement. However if you can’t make payment then your only option is to offer to pay by instalments. I know from experience that if the lender doesn’t accept your offer, the debt will ultimately end up with a debt collection agency. After that point it is usually much easier to come to an arrangement to pay. See the guide on how to set up a payday loan repayment plan to get started.
If the payday loan lender rejects your payment, you should still make a payment to them, based on what you can afford. This will show the lender that you are making an attempt to repay what you owe. As I mention above it will likely end up with a debt collection agency, and they are more flexible. I know because I have dealt with them so many times!
What about rolling over or deferring your payday loan payment?
A rollover or deferment is where you only pay the interest due on the payday loan for that month, and roll the loan over to the next. You can end up in a vicious payday loan trap by doing this. However if you feel you can repay your payday loan the month after then it could be worth considering.
Under no circumstances is it a good idea to take on a new payday loan to repay an existing one. Trust me, I know from experience that it will just make your situation so much worse.
If you are struggling with debt then remember you can always visit the debt advice page to find details of organisations who can help you with your debts.