When you take out a payday loan, you will receive some very important information about what will happen if you don’t pay back the loan on time. With luck, this information will not be needed but a large majority of people are finding they need this information because due to unforeseen circumstances, they cannot pay back their payday loan. Below is some information about what to do and what will happen in this situation.
Contacting the lender
When you realise that the payment for your loan isn’t going to be available for your lender to collect, the first step is to get in touch with them. They have certain legal requirements:
Treat you considerately and give you a reasonable amount of time to repay the loan. This can often include freezing interest and suspending the charges that may accumulate on the account.
Suspend the debt recovery process for a period of time while you put a repayment plan in place, either on your own or with the help of a debt advisor.
Give you information about source of free and independent debt advice if you haven’t already made use of them
Once they have done this, they should consider accepting a small token payment until you have organised your repayment budget so that it doesn’t leave you unable to pay essential bills. They also should not be calling you, texting you or emailing you. It is also advisable to keep a note of all phone calls you make to them with time and dates, plus the name of the person you spoke to.
There are also a few things your lender should not do:
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they shouldn’t call you at your place of work unless you have given explicit permission;
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they shouldn’t discuss your debt with anyone even a close family member
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they should not refuse to deal with a debt advice service you have chosen to help you.
Other steps
Cancelling the Continuous Payment Authority (CPA) that the lender will have put in place when you took out the loan is another move worth considering. You need to do this the day before, or earlier, that the payment is due by contacting your bank. Also, let your lender know you have done this.
Your lender may suggest you roll over the loan but resist this – it is in effect taking out another loan to pay off the first one and won’t solve the problem that means you couldn’t pay it in the first place. If you do want to take this option, be aware that under the new rules, the lender can only roll over a loan twice.
If the reason for the non-payment isn’t a simple mistake that can be easily solved but a symptom of an underlying problem then get some advice. There are several services out there that offer free of charge debt advice and assistance and they really do help. Charities such as the National Debtline and StepChange as well as the Citizen’s Advice Bureau are all there to help get you the information you need. Speaking to a debt advisor also means you can see what you can pay after you have paid the important bills such as mortgage, food and gas and electricity.
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