In this post I take a look at setting up repayment plans for Payday Loans. Some payday lenders will be helpful if you can clear the amount in a short time.
Others can be more difficult and more often than not, will sell your account to a debt collector. This post covers the things you need to set up a repayment plan.
Things you will need to setup your repayment plan
– A letter cancelling Continuous Payment Authority. Withdraws the lenders permission to debit your debit card. (If that is how you make payment).
– An offer of repayment letter. A sample letter to offer your repayment amount.
– An income and expenditure form. Provides a breakdown of your income, expenses and other debts. (You do not have to send this, but your life will be easier if you do).
Talk to your Payday Lender
First of all talk to your payday lender, explain you are experiencing repayment difficulties and see what they can do to help. They may propose a solution that is affordable to you. If not then carry on reading the rest of this post.
Cancel the Payment to your Payday Loan Lender
First and foremost if you have decided you can no longer continue repaying your payday loan, then you should write to both your bank and the payday loan company to cancel the Continuous Payment Authority. If your payment is made by direct debit, cancel the direct debit. It is important you do this otherwise they may empty your account.
To be extra safe I would actually recommend moving to a different bank. It might sound extreme but it is the safest option, although cancelling a Direct Debit and Continuous Payment Authority should be enough.
However be warned that not paying a payday loan will most likely damage your credit rating and you will also start to receive calls and letters chasing payment. The account could also be referred to a debt collection agency who may take further action to recover the debt. In my case none of them have if that makes you feel better. If you can I would recommend finding some way to pay off the loan. If not then you know what to expect.
In terms of the phone calls you can write to the creditor and demand your number is removed from their database. I did that with Quick Quid so that they wouldn’t call my work number.
Setting up a Payday Loan Repayment Plan
OK so you have got to the point where you cannot keep on rolling over your payday loan debts. You are not alone and it’s no surprise with the interest they charge. Well there are couple of things you should do before your repayment is due.
- You need to know how much you owe to your payday loan(s).
- You need to know how much you earn.
- You need to know how much you spend on your living expenses.
You can use the example income and expenditure form to enter your income and living expenses. Once you have the above information you can start to put together an offer of repayment. The income and expenditure form will calculate an offer amount for you and it is that figure you should use.
Writing to or e-mailing the payday loan company is probably your best way of contacting them. That way you have a written record of what’s been done. You could call them but you may find they try to get you to agree a repayment you cannot afford.
You can use the example offer of repayment letter and send that to the payday loan company along with the income and expenditure form if you chose to do that.
How should you make payment?
If your repayment plan is agreed then always make payment by standing order and not through your debit card or direct debit. That way you can control when the payment is made.
The Payday Lender will not accept my Repayment Plan
It is likely that the payday lender may reject your repayment offer, especially if it will take you a long time to pay off the account. Pay them anyway. However what is most likely to happen is the account will be sold off to a debt collector. I have found it much easier to set up repayment plans with the debt collection agencies. I guess because they aren’t expecting repayment over three months.
When (or if) the account is sold to a debt collector, send your offer of repayment letter as well as the income and expenditure form to them. The plan will normally be reset and you will be ok after that apart from the odd review asking for more money. Again if you can’t afford to increase payment just send the same offer of repayment letter explaining your situation has not changed.