If you’re struggling to pay back a payday loan or think that the lender has treated you unfairly, don’t panic or struggle in silence. Lots of people are in the same situation and lenders are geared up to help.
What’s in this guide
- Make sure you’ve claimed everything you’re entitled to
- Make an emergency budget
- What to do first if you’re worried you won’t be able to afford your next payday loan repayment
- What to do if you can’t pay back your payday loan
- Next steps if you’ve missed a payment
- When to get debt advice
- How to complain about a payday lender
- Extra support if you’re struggling financially and with your mental wellbeing
Make sure you’ve claimed everything you’re entitled to
To do this, first check our guide Make sure you’re getting the right entitlements
Make an emergency budget
If you’re worried about cashflow, take a look at what you’re spending and what income you have coming in.
Budget Planner
To help you manage your money, use our free and easy-to-use Budget Planner
You can also look at ways to reduce your household bills, such as switching providers for your gas, electricity or mobile phone contracts.
What to do first if you’re worried you won’t be able to afford your next payday loan repayment
If you’re going to struggle to make payments, it’s important you talk to your lender or provider as soon as possible. If you took out a payment holiday which has now come to an end, it’s important you understand what happens next.
Find out more in our guide What to do when your coronavirus payment holiday ends
If you don’t contact your lender, they’ll normally follow this process:
- They might ask you to get in touch by writing to you or calling.
- They’ll then issue you with a written ‘default notice’. This gives you an opportunity to arrange how to catch up with your missed payments.
- If you don’t deal with the debt, the loan will ‘default’. This will usually be after two to three missed payments.
- When the loan has ‘defaulted’, more interest and charges could be added.
- If you still haven’t responded, your lender might seek a County Court Judgment (CCJ). This is called a decree in Scotland. A CCJ gives your lender more options to enforce repayment of the debt. Bear in mind that these measures can affect your ability to get credit with other lenders in future.
- The debt may be sold on to a debt collection agency who will make contact and ask for payment, however they are not allowed to visit the property and remove goods. If the debt is still not paid following the issuing of a County Court Judgement (CCJ), the creditor can seek to obtain a warrant of control and instruct enforcement agents (also known as bailiffs). It is only at this stage that some goods can be levied and removed to pay towards the debt.
If you tackle the problem early, there’s far less chance that any of this happening.
To find out more, see our guide Payday loans - what you need to know
Is your household income getting squeezed?
If you’re facing higher living costs, but have little or no extra money coming in, find out about extra sources of income and support available to help you manage your household bills and save money in our guide Living on a squeezed income
What to do if you can’t pay back your payday loan
If you’re struggling to pay back a payday loan, the worst thing you can do is ignore the problem.
Here are the steps you can take:
Step one - contact your payday lender as soon as possible
By law, they must:
- direct you to sources of free and independent debt advice
- suspend recovery of the debt for a reasonable period if you’re developing a repayment plan with a debt adviser or on your own
- treat you fairly and with consideration, allowing you reasonable time to repay the loan which might include freezing interest and suspending charges.
- not bombard you with phone calls, emails and text messages
- consider accepting small token payments temporarily if your repayments mean you haven’t enough money left for essentials such as food, rent or mortgage, and utility bills.
Remember to keep copies of all emails and letters you sent to the lender and write down details of your phone calls to them. This is evidence of how you’ve tried to contact them if they don’t reply and you need to make a complaint.
Step two - what to think about before cancelling the recurring payment
There is a risk with cancelling a recurring payment that the company is going to charge you a cancelled direct debit fee.
It's a good idea to talk to your bank or lender about options for keeping up with payments before you do anything. You can also ask them about what will happen if you do cancel and if there'll be any fees or charges.
If you still decide to cancel, do it at least one day before repayment is due. Make sure you tell your lender you’ve done so.
Write down the date and time that you instructed your bank to cancel the recurring payment.
If after this date money goes from your account to the lender, complain to your bank. The bank must give you a refund by law.
It’s a good idea to follow up your phone call with a letter to your bank.
You can use a sample letter to withdraw your continuous payment authority from payday loan company, by visiting National Debtline
Make sure you tell the payday lender as soon as possible that you’ve cancelled the recurring payment because of difficulties paying back the money.
You’ll still owe the debt and the lender can go on charging interest and fees so it’s important you get free debt advice to help you deal with the problem.
Step three - refuse to roll your loan over
Your payday lender might suggest that you ‘roll over’ your loan for another month or so. This is a bad idea.
It means you have to pay even more charges and interest – so you end up owing much more money.
Instead, get debt advice and consider available options for dealing with your debt.
Before rolling over your loan, the payday lender must signpost you to free debt advice.
Step four - get help from a free debt adviser
If you’re struggling with bills or finding it difficult to deal with a payday lender, contact one of these free, confidential debt advice services:
- StepChange Debt Charity
- National Debtline
- Citizens Advice – England and Wales
- Citizens Advice – Scotland
- Citizens Advice – Northern Ireland
- Advice NI
The adviser will be independent and acting on your best interests – they’ll help you get your debts under control and might be able to negotiate and discuss all options with the lender on your behalf.
Tell your lender as soon as you start working with the debt adviser. Follow up your phone call with a letter.
When you’ve done this, your lender must give you a reasonable amount of time to come up with a repayment plan before using debt collectors.
If they keep contacting you while you’re working with the debt adviser, send an email asking them to stop.
Other points to remember
Your payday lender shouldn’t try to put you under undue pressure, including:
- calling you at work without your permission
- discussing your debt with your employer or family members
- refusing to deal with the debt advice service acting for you.
Next steps if you’ve missed a payment
If you’ve missed a payment, contact your lender to explain your situation. Try to avoid taking out more credit unless you know you can afford to pay it back.
For help to talk to your lender, see our guide Problems paying back a payday loan
When to get debt advice
Have you already missed a payment or are worried you’re going to miss a payment and are not able to come to an agreement with your lender? Then it’s best to get advice as soon you can, especially if you’ve got other debts as well.
Make sure you pay off priority debts first. These are debts such as mortgage or rent arrears, and fuel bills.
Find out more in our guide How to prioritise your debts
Find out more about how to make a plan to pay your debts at Citizens Advice (Opens in a new window)
Need someone to talk to about your finances?
If you’ve missed more than one bill payment, you can talk to a specialist today, online or by phone, who will be able to help you start sorting out your financial problems.
Find free, confidential advice now using our Debt advice locator tool
How to complain about a payday lender
If you feel your payday lender has treated you unfairly or you’re unhappy with the repayment plan they’ve proposed, complain to them first using our template letter if you need to complain to your loan provider (DOCX, 17KB) (Opens in a new window)
The lender then has eight weeks to resolve the situation.
If they don’t meet this deadline or you feel that they haven’t answered your complaint properly, you can complain to the Financial Ombudsman Service.
For help making your complaint, Resolver is a free online service and app that offers consumer advice and simplifies the process of complaining.
Using the Financial Ombudsman Service
The Financial Ombudsman Service is an independent service that deals with unresolved complaints about providers of financial services.
If they judge that the payday lender hasn’t resolved your complaint properly or has treated you unfairly, they can order the lender to pay you compensation.
Extra support if you’re struggling financially and with your mental wellbeing
Find help
If you’re feeling very low or suicidal because of your money worries, you need to talk to someone now.
Call 999 if you’re in immediate danger or give the Samaritans a call on 166 123
Having mental health issues might mean that you struggle to make the best money-based decisions for you, as well as act on them.
Find practical tips on how to manage financially and where to get free specialist help in our guide Money problems and poor mental wellbeing
Remember, if you’re struggling financially and with your mental wellbeing, it’s worth getting in contact with your bank, building society, lender or whoever you owe money to, to discuss your options.
However, picking up the phone and talking about your problems is often easier said than done when you’re struggling with your mental health.
Check out our guide on How to have a conversation about money to get practical tips on how to talk to those you owe money to
Most places that you owe money to have policies about supporting you if you’re vulnerable. But they can’t help you unless you ask.
For some general tips on how you can manage your mental health visit Rethink It covers everything from setting a budget to getting help if you, or someone you care about, is having a mental health crisis.
