Real-time users’ problems with payday loans and their solutions

Payday loans are the most convenient small emergency loans. When you need an immediate injection of cash to tide over, these loans seem to be the best alternative. Despite your poor credit report, you are likely to get approval, with a repayment plan of up to a month. Borrowing and repaying are both convenient.

Well, it seems a great offer on the surface, but deep down it can turn out to be a monster that traps you in an endless circle of debt. Payday loans are expensive, not to mention, poor credit history is what adds up the interest cost.

Many people find themselves in a hole after taking out a payday loan. This is because it wipes their salary and then they end up borrowing the same amount of money the next month. This scenario continues over a month and in the end, you wind up racking up debt.

This blog discusses some of the real-time queries from payday borrowers along with the solutions offered to them.

Case 1

I had a gambling problem and lost my wages every month. Soon I had to stop gambling and to get through the first month I took out a payday loan. When I paid back, I found myself borrowing again each month as it left me with no money. This scenario has been for the last three months. Now I want to end this spiral. What can I do?

If you have only payday loans, talk to your lender and request them to allow you to repay over a period of months. This will help you get through without borrowing and after a couple of months, you will become absolutely debt free. The lender may ask you for your income and expenditure details to decide on a monthly instalment.

If you have other debts, it is suggested to seek a debt management plan. Once your financial situation becomes sound, you can think of filing an affordability complaint against your lender that they loaned you more than your affordability to get a refund of interest. This will whittle down your debt. However, these complaints take months to close.

Case 2

I owe up to £15,000 and most of the debt is from payday companies. I earn £1,300 each month but most of the salary goes toward debt payment, leaving me with very little money. Now I am trying to get a DMO. I just want to know if I can make an affordability complaint while being on a DMP.

It is actually a very good idea to get a DMP. This will make your payments more affordable. You can undoubtedly file a complaint against a lender that loaned you more than you could afford, but this should be done after bouncing back. It is important to be sorted out first before you get into the complaint work.

Case 3

I owe up to £1,500 but now I am out of work. I have some savings and already applied for benefits. I cannot keep up with payments now. Will consolidation help me? What are the other alternatives?

The debt management plan is not a suitable option for those who are unemployed. In fact, this is not a relevant option for jobless people even if you have most acceptance payday loans from direct lenders for the unemployed. You should have a steady source of income to get this approval. The first thing is to see how much money you are left with after meeting all of your expenses. Is it possible to use that money for the debt payment?

Your lender might ask you to make a minimum payment. This will prevent your credit score from being damaged. However, interest will accrue over the unpaid balance. If you decide to stop payments at all, you are simply taking a toll on your credit score, so this is not suggested at all.

Ask your lender if they can freeze interest payments unless you land a job.

Case 4

I have outstanding debt from 4 payday lenders but I suspect that I have been loaned irresponsibly. If I email them to know my loan history, will it get them into action to make me outstanding dues immediately just because I have asked for this information? I am looking for some advice.

It may or may not work in your favour. If you lose your complaint, you will be liable to make affordable monthly payments. Of course, this is a nightmare if you cannot pay it back. However, you are likely to get a refund if early on you borrowed a lot more than the last loan you took out from that lender.

Technically, you should avoid putting in such complaints if your debt is soon going to be older than six years. Otherwise, it may wake up a lender and you have no right to refuse to make payments. Worse, the debt may be sent to debt collection agencies or a CCJ could be issued against you.

Case 5

I took out payday loans from three payday companies. Now I am struggling to keep up with payments, so I contacted them if they can offer a new repayment plan. I have heard only from one of them. The rest two have not yet replied. My concern is if I cancel auto-debit mode, will it attract additional interest? Is there any way to assure that they will not charge interest at this point?

Before accepting a revised repayment plan, make sure that you can repay it. If not, offer an amount you can afford.

Is there any way to be rest assured that they will not charge any interest at this point?

  • No, but soon they will hit the payday loan cap, so you do not need to see your debt dramatically going up if you do not pay off the debt.
  • If you win the affordability complaint, you will get rid of it, so it does not matter how much interest they charge on the outstanding balance. Remember that if you lose the complaint, you are in serious trouble.

The final comment

Payday loans can easily trap you in debt especially if you are caught by unpredictable situations like unemployment. Things become worse when you have to take out guaranteed loans for the unemployed from direct lenders. It is always advisable that you borrow money with a sense of responsibility. You cannot just hold a lender entirely responsible for your worse financial situation

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