To get rid of payday loan debt, you have a couple of options. The first option, as mentioned, is to try and write off what you owe. With an IVA, it’s possible to write off substantial amounts while bringing your other debts under control.
Your other option is to use a scheme called ‘payday reclaim.
Payday reclaim firms came about after the fall of the UK’s largest payday loan company Wonga. Between 2018 and 2019, complaints about payday loan groups reached astronomical levels, with the Financial Ombudsman Service seeing a 130% increase in complaints*.
Although the industry is under tighter controls now, payday reclaim groups aim to get you a refund on mis-sold payday loans. Therefore, if a provider issued you with a loan which you had no hope of repaying, then you may have grounds to get your money back.
With IVAs, on the other hand, your assets are protected.
* According to The Guardian, 'Payday lenders face sharp criticism as complaints rise 130%', May 2019.
If you can’t make the payments on a payday loan, then the lender may issue a late fee and increase interest on the account. Alternatively, through a system called ‘continuous payment authority’ (CPA), the payday loan provider may take money from your bank account. Of course, if you don’t have the funds to make a repayment this situation could push you into your overdraft.
If the payday loan required a guarantor, then the provider may take money from that person’s account instead of yours. Finally, in extreme cases, the lender may turn to a collection agency or bailiff company to reclaim what’s owed.
Therefore, the longer a payday loan remains unpaid, the worse the debt becomes.
Payday loans can be included and resolved through an IVA. This debt solution is a legally binding agreement between you and your lenders which aims to repay as much as you can through affordable monthly payments.
As well as making your debts much more manageable, anything left outstanding at the end of an IVA is written off.
Writing off payday loan debt isn’t something which will happen overnight. An IVA generally lasts for at least five years so your debts won’t be written off until then. However, while the IVA is active, interest rates and charges are frozen.
This means your payday loan debts won’t increase during this time.
Once the IVA ends though, your debts will be a href="/debt-hub/write-off-debt/" rel="noopener" target="_blank">written off.
We hear about payday loans on a regular basis. Usually, it’s from people who’ve had no choice but to apply for one and then struggled under the debt. We’ve helped these people on the path to regaining financial control and can assist you as well.
For a no-obligation conversation about your circumstances, get in touch today. We can discuss your payday loan and determine if an IVA is the right solution for you.Help me with my debts
* As of 02/02/21 15,377 of our customers were in an active IVA. ** Average unsecured debt anticipated to be written off for IVAs approved between 1 January 2020 and 31 December 2020 is £10,568, based upon successful completion. *** Based on independent verified reviews from Feefo, for the full details of these please click here.
During the approval process for a payday loan, covered in the terms and conditions, typically you will provide your credit or debit card details to the firm and authorise them to take regular payments. This is known as continuous payment authority.
If you fall behind on the payments, the CPA may mean that money you can’t spare still goes towards the lender. Furthermore, if account details change, there’s no guarantee the CPA will be updated in time.
Payday loans are a form of unsecured debt. This means, if unpaid, the consequences are generally less severe than other forms of arrears, such as council tax. However, this still means a payday loan provider can employ bailiffs or a debt collection company to reclaim what’s owed.
You will probably find it difficult to get a payday loan while in an IVA and, as a general rule, this is not advised. If you’re struggling and need additional financial support, you could speak with your IVA supervisor.