If you’re struggling with your finances and considering applying for a payday loan, you should consider the alternative solutions on offer.
Payday loans can be a quick and easy way to get some extra cash, but they can also be a trap. With high interest rates and fees, it is easy to get caught in a cycle of debt that is hard to escape.
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National Debt Advice is regulated by the Financial Conduct Authority to give Debt Counselling Advice to people who are struggling with debt.
To find out more about managing your money and getting free debt advice, visit Money Helper, an independent service set up to help people manage their money. National Debt Advice is not associated with Money Helper.
Debt Solutions to consider
IVA (Individual Voluntary Arrangement)
This is a formal agreement between you and your creditors whereby you repay a percentage of your debt in affordable, monthly payments, usually over a period of five years.
This is an informal agreement between you and your creditors. You will agree to repay your debt in reduced, more affordable payments at the most convenient time for you.
What is a payday loan?
Payday loans can provide a much-needed financial boost in a short amount of time. However, they can also lead to financial ruin.
It is important to understand the pros and cons of payday loans before taking one out.
Benefits and risks
Benefits of a Payday loan:
They are easy to access
They have fewer requirements than other loans
They don’t check your credit
It's an Unsecured Loan
Risks of a Payday loan:
They are expensive
Payday Loans are considered predatory, unfair and misleading
It's easy to get in trapped in a debt cycle
They target low-income, minority communities
They have access to your bank account
They don’t help build your credit
How does a payday loan work?
All payday loans have to be repaid on the following payday. They should never be used for long term borrowing. However, more often than not, we see them transform from a quick fix solution into a long-term debt problem.
Typically, lenders will take your bank card details in order for your loan to be transferred immediately. What many aren’t aware of is this also gives them the ability to take the loan repayment automatically on the due date. Therefore, to avoid extra interest and fees from your bank, it is your responsibility to have the full amount you owe available in your account on the due date.
As payday loans were designed to be taken over a short time period, you should only consider using one to address very short-term lending.
In principle, you should only use the loan if:
You only need to borrow a relatively small amount of money
You only need a loan for a brief period of time
You are able to repay the full amount with interest – usually around 20% by your following payday
What if I can’t repay my payday loan?
It is important to take action straight away, if you cant repay your payday loan then you have 3 options:
Ask your lender to rollover the amount in to next month
Take out another payday loan to repay the original (This is not advised)
Contact National Debt Advice for an alternative solution
If your lender allows you to rollover your repayments, they will often increase the interest which will make the amount you owe larger. Similarly, taking out another payday loan is hard to manage and if you don’t keep track you will soon see your debt increase.
FREE Expert debt advice
When you contact National Debt Advice, we will provide you with free, expert debt advice and immediately assess your situation to decide which of our debt solutions is best for you.
We have twenty years’ experience and have developed a well-established method of dealing with creditors, so we will always contact them on your behalf. When contacting them, we aim to get them to agree to freeze interest charges and reduce monthly repayments based on what you can reasonably afford to repay.
Why choose National Debt Advice?
We can reduce your monthly payments!* Not only that but we're:
An FCA Regulated Debt Counselling Service
Have a 24/7 Live Chat Support
Have excellent reviews on Trustpilot
We give impartial and confidential advice
*Monthly payments are based on individual financial circumstances.