No-one escaped the recession. Businesses of every size were hit, and people’s budgets were stretched to the max. The emergence of payday loans, therefore, offered a quick fix for a person’s financial woes, as banks were less willing to part with their cash. Offering instant payments and little to no financial background checks, it’s never been easier to receive a payday loan.
So, are payday loans too good to be true? Most definitely. Even if a person borrows money and pays it back within a few days, they’ll still be hit with interest charges up to 25%. Imagine the interest charge if they fail to make a repayment within the arranged timescale!
Circle of Debt
Payday loans can create a vicious circle of debt. If a person borrows $1,000, they’ll probably repay $1,200 in 60 days time. As a result, they’ll have most likely drained their finances. So what will they do to pay their bills next month? They’ll request another payday loan.
Payday loans are also available to those who have little financial experience. Young people are finding themselves steeped in debt due to the quick cash fix, as many have next to no experience in paying bills. Therefore, they’re tarnishing their credit history at a young age, and will most likely be refused a mortgage or additional credit in the future. We, therefore, need to educate young people in the classroom on how to manage their finances, and financial services they should only use as a last resort.
UK payday loan companies were also accused of “grooming” children to become future customers, as they aired animated cartoons on children’s TV channels during advertisement breaks. As a result, the UK’s regulator, Ofcom, is now taking steps to ban the adverts on the channels.
Those struggling with bills should create a budget, making a note of their income and outgoings. Should they find they’re paying more out than what’s coming in, they should ring up lenders, such as a mortgage provider, to see if they can restructure a repayment plan. A little reshuffling might be all a person needs to manage their finances.
Anyone struggling with debt should consult a debt expert, such as Churchwood Finance, who can help a person control their finances once and for all.
How to Get rid of PayDay Loan Debt
Unfortunately, many people are turning to payday loans as a way of fixing their finances in a fast manner. Often seen as a viable option for those suffering from bad credit, payday loans are, more often than not, more trouble than they are worth.
Anyone faced with payday loan repayments must strive to pay off the debt as soon as possible or face high interest fees, which can often amount to a much larger debt. However, if you cannot afford to make a payday loan debt repayment, you must not panic. Here’s what you have to do…
Don’t Take Out Another Payday Loan
Many people will often approach a different payday loan company if they cannot pay a debt; however, they will merely be borrowing from Peter to pay Paul. While it might seem like a simple fix at the time, it can ultimately result in further financial woes.
Cancel a CPA Payday Payment
Most people fail to realise they set up a continuous payment authority (CPA) when they apply for a payday loan. A borrower can, therefore, stop payment attempts being taken from their account from a lender, so they can focus on priority debts, such as a mortgage repayment, household bills and food costs. If a borrower fails to cancel a CPA, and they do not have the funds in the bank to cover the payday lender’s money request, they may incur bank charges.
It is important to note that a payday lender can take money from an account if they have a direct link to a borrower’s bank, which can lead to repeat repayment attempts.
To cancel a CPA payday loan payment, you can do 1 of 3 things:
- Ring the bank of before or on the due repayment date to cancel the payday loan payment
- Email a letter to the bank within 1-5 days of the payment
- Send a letter to the bank if they payment is over 5 days away
Do not worry too much about payday loan repayments. A borrower only has to pay back what they can afford each month. Whilst a payday loan lender will most likely encourage you to make a full repayment, you can negotiate a longer repayment plan. However, it is important to be aware that extending the loan period could result in an increased repayment amount, as the loan will have gathered interest, fees and possibly other charges.
Seek Debt Help
Never suffer in silence with debt. The longer a borrower leaves a payday debt, the worse the situation will become. It is essential to receive professional advice from a debt expert when faced with payday loan repayments, as they can help take a person’s finances out of the red. Millions of people in the UK are struggling with debt, so do not be ashamed.
Bear in mind, payday lenders are required to follow the Good Practice Customer Charter, as well as the Financial Conduct Authority (FCA) rules. If you believe they have failed to follow the charter or the FCA rules, you have a right to complain to the lender and then to the Financial Ombudsman Service (FOS).