When Payday loans get out of hand it can quickly lead to a vicious circle of debt in which you find yourself taking out new loans each month just to meet the repayments on existing ones. Having too many payday loans and being unable to pay them can be a frightening experience as many of these companies will aggressively pursue money that is owed to them.
If you are in this situation the good news is you are not alone, and the law is on your side. An estimated 1.2 million people in the UK take out payday loans each year and, with astronomical interest rates often exceeding 2,500 percent APR, many find themselves in even deeper financial trouble. The credit counselling charity Step Change, which will help to draw up a debt management plan for free, says the number of people they advise on payday loan difficulties has quadrupled in three years.
Help is at Hand
The important thing in dealing with a financial crisis is not to panic. There are well-trodden paths, protected by law, which can lead you out of financial trouble and into a more stable future, and you do not have to take them alone. There are many sources of professional debt help, some free and some paid for, and it is best to consult them first. Payday loan companies typically use very heavy-handed tactics to get their money back so you will need the best advice behind you to deal with them.
The first step is to make sure your bank account and the money in it is protected. Depending on the payment arrangement you have agreed it might be possible for the company to withdraw the full outstanding amount of your loan if they know you are in trouble. So tell your bank to cancel any direct debits, standing orders or cheques and to refuse all future payments to the loan company.
Protect Your Money
The loan company might have required you to sign a continuous payment authority (CPA) and there is some confusion as to whether or not this can be cancelled. It can, under the terms of the Payment Services Regulations 2009, but if there is any doubt about your bank’s willingness to comply then either cancel your debit card and request a new one or move your money to a new account. Next write – never call as this will leave no record – to those you owe money to and explain that you cannot pay.
Debt advice organisations can help with sample letters and in devising a workable debt management plan which will offer the lenders reduced payments you can manage. They do not have to accept, and you may get a string of nasty telephone calls, but ultimately they have no choice short of taking you to court, where a judge is very likely to order even lower payments. Don’t allow yourself to be intimidated – with the right debt advice you will have all the support you need to get back on your feet.