Payday Loan Debt
Table of Contents
What Is Payday Loan Debt?
A Payday Loan allows you to borrow a small amount of money and pay it back once you have received your next wage.
This helps you to cover a shortfall in money that may have occurred due to an emergency. They usually carry a high interest rate but can be applied for very quickly in comparison to other types of credit.
Due to their ease of access, especially to people who, perhaps, can’t afford to pay them back, they have attracted much controversy.
How Does a Payday Loan Work?
An individual who is experiencing a temporary issue with their finances, can quickly secure a loan. They will only need to provide minimal information, such as a bank card. The lender will often not run a credit check, making them accessible to people who have poor credit history.
Once accepted, the money goes straight into the applicant’s bank account, to be repaid at the end of the month, along with interest and charges.
Because of the short-term nature of these loans, they often carry an exorbitant interest rates; sometimes as much as 1500%
Due to the controversial nature of payday loans, they have now become regulated by the FCA (Financial Conduct Authority) and the following rules should be followed by the lender:
Lenders can charge a maximum of 0.8% interest per day
Lenders can charge a maximum of £15 for a defaulted payment, alongside interest
There is a cap of 100% for the cost of the loan, meaning you should never repay more than double the amount you borrowed.
How Do People Fall into Payday Loan Debt?
Short term money problems can often indicate longer term problems, like a lack of savings for example or simple overspending. If you are living close to the edge with your finances, then a loan can seem like a good idea, but in reality, it leaves you with just another outgoing that is difficult to maintain.
Once you fail to make your repayments, the issue is compounded with penalty charges and further interest making the situation begin to spiral out of control.
Who Can Help with Payday Loans?
Many people across the UK are struggling with a payday loan and what seems like easy money at the time can soon become a big problem. If you find yourself in trouble with a payday lender then in the first instance, the best way of tackling it can be to contact them.
If you cannot come to an arrangement with the lender, then seeking debt advice can be a great idea.
If you are having trouble repaying your Payday Loan or if you have other unsecured debts that are beginning to get out of control, then the following solutions may be right for you:
If you live in England, Wales Or Northern Ireland:
If you live in Scotland then the following may suit your needs:
Contact IVA4Me for help. We can help you begin to get your life back on track.
Payday Loan Debt FAQs
How Can a Payday Loan Cause Debt?
Payday loans are an extremely expensive and high risk method of borrowing. They are usualy reserved for people who already have issues with their finances and/or credit rating.
Can You Go To Jail For Unpaid Payday Loans?
Payday loans are a high risk, high interest way of borrowing and if you are using this service regularly then that could indicate that your control over your finances is slipping.
How Do I Get Out of a Payday Loan Debt?
Taking out a payday loan can lead to a cycle of ever increasing payments, where you borrow an amount you need, then you borrow a higher amount to cover the original loan. This can escalate quickly.
If you are having trouble with payday loans, then it’s quite possible you have other debts as well.