Payday loan debt help

If you’re struggling with your finances and considering applying for a payday loan, you should first consider the alternative solutions on offer. If your finances are getting on top of you and you are finding it hard to manage, PayPlan can offer quick, free and professional advice to help you find a better solution and avoid taking on additional debts.

Payday loans are difficult to stay on top of and there are alternative solutions that mean avoiding such extreme consequences:

• IVA (Individual Voluntary Arrangements) – this is a formal agreement between you and your creditors whereby you repay a percentage of your debt in affordable, monthly payments, usually over a period of five years.  
• DMP (Debt Management Plans) – this is an informal agreement between you and your creditors. You will agree to repay your debt in reduced, more affordable payments at the most convenient time for you. 

What is a payday loan?

A fairly recent financial innovation, a payday loan is a short term, unsecured loan for people who find themselves with too little money each month to cover their outgoings due to either low income or an unplanned expense. The amount you receive can range from as little as £50 to well over £1,000. However, you will always be required to pay the full sum of money back by your next payday, which makes it a difficult debt to manage.

What’s more, because the representative APR of a payday loan is high, interest charges can quickly turn this reasonable short term solution into an overwhelming debt.

If you are struggling to repay a payday loan and are worried about debts spiralling out of control, contact PayPlan today. 

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How does a payday loan work?

No matter how much money you have borrowed, all payday loans have to be repaid on the following payday. They should never be used for long term borrowing. However, more often than not, we see them transform from a quick fix solution into a long term problem.

Typically, lenders will take your bank card details in order for your loan to be transferred immediately. What many aren’t aware of is this also gives them the ability to take the loan repayment automatically on the due date. Therefore, to avoid extra interest and fees from your bank, it is your responsibility to have the full amount you owe available in your account on the due date.

As payday loans were designed to be taken over a short time frame, you should only consider using one to address very short term lending. In principle, you should only use this platform if:

• You only need to borrow a relatively small amount of money
• You only need a loan for a brief period
• You are able to repay the full amount with interest – usually around 20% – by your following payday

To help your understanding of how payday loans work, see the advantages and disadvantages below:

Advantages of payday loans

• Applying for a payday loan is a quick and easy process
• Loans can be in your bank account quickly
• They can be an effective short term solution

Disadvantages of payday loans

• You will be required to make quick repayments
• Interest rates can increase both easily and rapidly 
• Payday loans are often obtained to pay back other forms of debt, including previous payday loans. This is becoming known as the payday loan trap, and it can be difficult to break this cycle
• In comparison to a credit card’s APR – typically around 20% – it is not unusual for a payday loan to have an APR of well over 1,000%

Payday loans are only worth considering if you are in the right situation to benefit from them. For long term debt solutions, you should avoid a payday loan. If you are struggling to make ends meet and want to see what the best answer for your needs is, contact PayPlan today for free advice.

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What if I can’t repay my payday loan?

If you can’t repay your payday loan then you have three options:

• Ask your lender to rollover the amount to next month
• Take out another payday loan to repay the original
• Contact PayPlan for an effective solution

If your lender allows you to rollover your repayments, they will often increase the interest which will make the amount you owe larger. Similarly, taking out another payday loan is hard to manage and if you don’t keep track you will soon see your debt mount.

However, when you contact PayPlan, we will provide you with free, expert debt advice and immediately assess your situation to decide which of our debt management solutions is best for you.

We have twenty years’ experience and have developed a well-established method of dealing with creditors, so we will always contact them on your behalf. When contacting them, we aim to get them to agree to freeze interest charges and reduce monthly repayments based on what you can reasonably afford to repay.

If you are struggling with your finances, or have a payday loan you don’t think you will be able to repay, contact PayPlan today for free advice and expert solutions.

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What is the best way to pay back multiple payday loans?

Your payday loan debt can easily spiral out of control; if you can’t afford to pay the debt back on time there is often pressure on you to take out another payday loan to pay off the first one. This can become a never-ending cycle which will quickly mount up your overall debt.

Normally, if multiple payday loans have been accumulated, then payday debt consolidation might be attempted. Payday consolidation is effectively one large payday loan used to repay the others. Although this can bring short-term respite, if the underlying reasons for getting into debt aren’t addressed, then the debtor is likely to end up defaulting on the large payday loan repayment. If you go down this route, you will most likely have to pay a significant amount of interest.

If you have or are considering multiple payday loans, then contact PayPlan today for free, expert advice. We have a number of alternative solutions that can solve your debt problems quickly and securely

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How do I avoid Payday Loans?

More often than not, payday loans are obtained to cover unexpected spends. Therefore, it is important you do what you can to reduce your monthly expenditures, including:

• Take note of your incomings and outgoings: this is a great way to analyse your budget and will help you identify where you can cut down your expenditure. This could include cancelling gym memberships, switching supermarkets or changing insurances.
• Try and keep a small amount of money aside each month: this is a great ‘security blanket’ and will soon add up, so if you do find yourself struggling with your finances you have something to rely on.
• Contact your mortgage lender: it is worth requesting a mortgage break until you can afford to make the payments again.
• Contact PayPlan: if you have outstanding debts that are becoming difficult to manage, then you can contact PayPlan for free advice and a safe, affordable solution. 

For immediate and free advice, call PayPlan free on 0800 316 1833 or use our Debt Help Form to submit your debt problem online.