Payday loans are used to help people with week to week funding gaps. A typical £100 loan costing £125 to repay right after one week. However , when it goes wrong and you can’t afford to repay the loan what happens? We examine what happens debt solutions are available for people with payday loan financial debt problems and what you should do to manage this problem.
What is a payday loan?
Payday loans first became popular in the United States and quickly spread across the Western World for people who need help with their funding short fall until their particular next payday. Since inception, pay day loan companies have tweaked their technology and payment methods to ensure they can provide an exceptionally speedy service. Some lenders are claiming to be able to have the cash in your bank within 20 a few minutes. Advertising by companies providing this particular credit often centres around receiving the money in your bank immediately and enabling you to spend it within an hr.
The payday loan is usually for less than £500 for first time customers and for a brief term period (usually between 7-10 days). You can apply online or on the high street. The interest rates for payday loans can vary from 2, 000% to over 4, 000% in the UK. These high interest rates are one of the problems individuals have with cash advance loans, especially when it’s a struggle to repay the money borrowed. Whilst the original loan may be small, the interest rate means the repayment can be huge, particularly if the money is repaid past due.
“I can’t pay back my short term loan”
So , what would happen if you cannot afford to repay your payday loan? The payday loan company would rightly expect their own money back along with the fee they charged to lend you the money. If this does not happen then you can expect extra fees and charges. These payday loan charges will include a late transaction fee and a daily rate at the top for the outstanding balance. With pay day loan debts, the longer you leave the debt unpaid the harder and much more expensive it becomes. The best situation would be to calmly sit down, complete an income plus expenditure, which includes what you spend on your mortgage, rent, food etc after which check what you have to pay contractually to each creditor each week or 30 days. If you don’t have enough money to live plus pay your creditors each month then you possess a debt problem where you need help. In case you are struggling to make the ends meet then you ought to still speak to a debt assistance charity for help because they have got solutions to debt which can help you.
Payday loan debt solutions
There are debt options available for people with payday loan debts that you can access via a registered debt charitable organization.
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These solutions start with token payments towards your payday loan company each week. These token payment agreements may not be for the full amount however if the charitable organisation can get interest and charges iced then at least the problem will not get worse and you will be repaying your debts.
If you have additional unsecured credit debts then you may want to think about a debt arrangement scheme (Scotland) or debt management plan. These types of solutions require you to pay back all of your debt but over a longer than decided period. This way, your creditors get back all of their money and they may even freeze attention and charges. The benefit for you is that you simply will have negotiated with your creditors and helped to avoid the situation growing considerably worse.
An IVA or Protected Trust Deed would allow you to repay your debt, including any type of loan more than an agreed period of time. If you conserve the arrangement you will be debt free within 3 or 5 years getting paid back an affordable monthly amount. You should only repay a percentage of the money you borrowed via your short term lender and other creditors.
In an even worse case scenario you would have to get into Bankruptcy to resolve your debt problem. This is rarely for people with just cash advance loan financial obligations, but people who have multiple creditors with lots of debt. All of these solutions will have an adverse impact on your credit file (a default will be added and last to get 6 years making being accepted regarding credit in the future difficult).