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Payday loans can help you get cash paid straight into your bank account at short notice. They’re a popular solution to cover immediate or unexpected expenses that need to be paid while you’re waiting to receive your next wage packet.
Payday loans are intended to be short-term loans that are paid back in full as soon as payday arrives. As a non-priority debt, it’s unlikely that you’ll lose your home or face criminal action if you’re unable to pay off the loan, but that doesn’t mean payday loans are risk free. In fact, they typically charge high interest rates and, if you don’t clear the debt immediately, it can be surprisingly easy for the amount you owe to spiral out of control.
When you apply for a payday loan, you’ll typically only be borrowing funds for a short amount of time, although some lenders offer a three-month loan term that can be repaid in instalments. Even so, this type of loan is often seen as an emergency or last resort option and often charges high rates of interest.
Historically, payday loan interest rates have been so high that the Financial Conduct Authority (FCA) introduced new rules in 2015 to control the charges applied to borrowers. Under these regulations, the interest and fees charged daily must not exceed 0.8% of the initial amount borrowed and default penalties must not exceed £15. Borrowers should never have to pay back more in fees and interest than the original loan amount.
If payday arrives but you’re unable to pay back the loan, there are steps you can take to stop payday loan debt getting out of control. Firstly, try not to take out any additional loans if you can avoid them. Having to cover new monthly payments could lead to more stress and make it more difficult for you to tackle your payday loan debt.
You could also consider seeking professional debt advice, especially if you’ve come to rely on short-term loans to cover your everyday expenses. An impartial debt advisor can take the time to fully assess your financial situation and help you identify the best debt management solutions for you and your individual circumstances.
Breathing space could be another good option if you need time to take stock and consider your next steps. This is a government-backed scheme that lasts for 60 days. During this time, you’ll need to continue paying your existing debt, but you won’t have to worry about being charged any additional interest or fees or facing court action. Payday loan debt is eligible for breathing space, but you can only apply once in any 12-month period, and you must not be in a DRO, IVA or be an undischarged bankrupt to qualify.
Payday loans are an expensive way to get over temporary debt problems and can quickly spiral out of control, further adding to your debt issues.
That’s where speaking to an experience debt solution provider such as My Debt Plan has its benefits. We have a team of friendly advisors who offer debt help every day to UK residents.
We can talk through your options and support you to find the right debt management solution for you.
For free advice about your finances and the debt solutions available that can help you pay off your payday loan debts, call us on 0161 826 0585.
Tell us about your current debts and one of our experienced and friendly advisors can help you get the ball rolling.
Dependant on your circumstances and financial situation, we'll let you know if an IVA is a potential solution for you.
If you qualify for an IVA, we will take the necessary steps to set up and arrange this for you.
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