If you can’t repay a payday loan or a short-term loan, then it is really important to know what to do and when to do it. Providers of personal loans for bad credit are very careful when making the decision about whether to say “yes” to a borrower when they make an application for a loan.
When someone takes out a loan until payday or a short-term loan online, they genuinely always believe they can pay it back and so does the company lending them the money.
Your options when you cannot make your payments
What are the options you have when you struggle to make your payments on a bad credit loan? First, you need to admit that there is a problem for yourself.
There is no doubt that you will be trying to think of as many different ways to repay as you can but sometimes that is not possible, despite your best efforts.
Remember that you are not alone. The Daily Mail reported recently that 28,000 people had contacted a debt charity to help them with payday loan debts.
Acknowledge your financial problem
When you acknowledge your financial problem, that is the start of putting things right. Just like if you are at work and you are not sure on how to do something the boss has asked you to do, you do not just sit there and worry
– you ask your boss or a colleague for help.
It is the same principle for borrowers of short-term loans when you are struggling with payments and you can’t repay your debt.
Lenders appreciate it when a borrower who cannot repay a loan gets in touch with them to tell them. If you acknowledge your financial problem and call the lender about it, they want to help. You do not have to struggle on your own.
When you acknowledge your financial position, it is good for you too. Talking with friends and family about the problems you are facing means that you do not have to carry the burden all by yourself.
Let your creditor know that you are in financial difficulty
The first thing you should do is to let your creditor know that you are in financial difficulty. The minute you realise you are in too deep and you have taken on too much is the minute you should contact them.
If you have taken out an instant loan online and you do not let your creditor know that you are in financial difficulty, they cannot help you. But it may surprise you that, because the companies offering personal loans for “bad credit customers” are licensed by the Financial Conduct Authority, there are certain rules and guidelines that they must follow.
Those rules and guidelines are specifically put in place to help customers who are struggling with payments and who can’t repay their debt.
There are lots of different ways you can get in touch to let your creditor know that you are in financial difficulty. The lenders that we spoke to when doing research for this article suggested the best way to contact them was by phone.
It is much more personal than doing so by email, by online contact form, or by letter. You are there on the phone with a customer support worker who can relate to you on a one-on-one basis.
The customer support worker you speak to when you let your creditor know that you are in financial difficulty is part of a specially trained team. They work with customers every day who are struggling with payments.
Without wishing to downplay the stress you are feeling right now because you cannot repay your loan, they will have had conversations with many people in the same situation – it is part of their job.
What these customer support workers are there to do is to help you plan. You will tell them that you cannot see how you can make the next repayment on your loan. Their job is to listen to you and, together with you, work on a plan to repay the loan without causing you further unnecessary hardship.
Customer service numbers for payday loan and short-term loan companies
There are dozens of different lenders offering personal loans for “bad credit customers”. In the list below, we have compiled a list of customer service numbers for the some of the largest companies in the UK.
0203 564 7028
The Money Shop
0330 024 0704
0843 504 0430
Wage Day Advance
0843 504 0423 / 0330 303 2000
020 3006 2000
0800 056 1515
0151 448 7324
020 8532 1969
Safety Net Credit
0800 180 8400
How your lender may help you to resolve your debt
As we mentioned earlier, when you have acknowledged your problem and you are speaking with a customer support worker, there are a number of ways how your lender may help you to resolve your debt
There are, however, three main ways how your lender may help you to resolve your debt.
When you are speaking to your customer support worker, you should expect to hear one, two, or all of the following options.
Put a 30-day hold on your account
Many short term/payday loan lenders will initially offer to put a 30-day hold on your account.
If they do put a 30-day hold on your account, you get extra breathing room as a borrower. If you have taken out a payday loan, that is an extra 30 days to find the money you need.
If you have taken out a short-term loan which you are paying back over a period of two to twelve months, they may shift all your repayment dates back an extra 30 days so you have a chance to recover financially before resuming your repayments.
In addition, when a lender chooses to put a 30-day hold on your account, they will not call you demanding repayment.
Extend your repayments for longer
For borrowers facing particularly difficult situations, your lender may extend your repayments for longer.
For customers with a loan until payday, that may mean paying back over two or three smaller instalments rather than in one big lump sum when you receive your wages as originally agreed.
For customers with short-term loans, it may mean that they extend your repayments for longer.
For example, you might have borrowed £500 over 6 months and if they do offer to extend your repayments for longer, they might extend the loan to 9 months instead.
Please be aware that if your lender does extend your repayments for longer, they may charge more interest and a default fee.
Freeze your interest
Each lender is different and even if they do give you longer to pay back your loan, many of them will choose to freeze your interest.
When a lender makes a decision to freeze your interest, no extra charges will mount up. Your lender recognises that you are in trouble and they do not wish to add to it. They recognise that you want to pay them back and they are happy to give you the room to do that.
What if a borrower loses their job and there is no guarantee when the next lot of wages will be coming into their household? Lenders allow you to make small gesture payments until your finances are back on track and you’ve found stable employment again.
When speaking to your customer support worker, make sure you explore every option with them and never be afraid to ask a question. The best deals are done when both sides know what each other can do.
Understand your rights and responsibilities before you contact a lender
The Financial Conduct Authority governs all loan companies in the UK. Each lender and each broker needs a license from the Financial Conduct Authority before they can make or arrange a payday loan or a short-term loan to someone. If you know the rules they have to follow, you can understand your rights and responsibilities before you contact a lender.
As a borrower, when you do understand your rights and responsibilities before you contact a lender, you are better prepared to deal with your customer support worker so that you can try to achieve the best and most manageable outcome for you.
Lenders’ responsibilities when they approve a payday loan or a short-term loan
Because of the Financial Conduct Authority’s rules, there are specific lenders’ responsibilities when they approve a payday loan or a short-term loan. Each lender has to follow these rules to keep their licence and to operate lawfully.
The three major rules are that:
- You cannot be charged more than 0.8% interest a day (that is £24 for every £100 you borrow)
- When all interest and fees are added together, you must never pay more in interest and fees than you borrowed. So, if you borrowed £500, you will never pay back more than £500 in interest and fees on top of the £500 you took out
- A lender is not allowed to charge you a default fee of higher than £15. You may have to pay a default fee if you miss a repayment date, for example.
The reason why these particular lenders’ responsibilities when they approve a loan have been put into place is to ensure that money is only lent to people who can afford to repay it.
Lenders’ responsibilities when you struggle with repayments
There is a different set of lenders’ responsibilities when you struggle with repayments.
If a borrower cannot make repayments on your loan, this is a stressful time and lenders’ responsibilities when you struggle with repayments are there to protect you.
The main rules you need to know are that:
- Your lender must point you in the direction of independent and free debt counselling and advice services
- They must not try to collect the debt while you’re working out how to repay it. You can work out how to do that on your own or you can get help to do it
- They must treat you fairly and give you a reasonable length of time to repay the loan
- They should not make multiple attempts to contact you
- They must consider an offer to make small payments as a gesture of your good will and those small payments must not make paying your normal bills harder
When you signed up, you would have agreed that your repayments would be collected from your bank account by something called a Continuous Payment Authority (CPA). If your lender tries unsuccessfully to take a payment using the CPA twice, legally they are not allowed to try again.
You are allowed to cancel your CPA if you are trying to protect the money that remains in your account. You will need to contact your bank to do so. It is always best to contact your lender to let them know that you have done this.
Please be aware that your debt to the lender will still be outstanding if you cancel the CPA.
Points of contact when you find yourself in unmanageable debt
There are a number of advisors and professionals you can go to. But choosing the best points of contact when you find yourself in unmanageable debt depends on the type of debt you have, the amount of money you owe, and your own individual circumstances.
If you fall behind on your repayments, your lender will direct you to one of the debt advice services. They are one of a number of reliable and helpful points of contact when you find yourself in unmanageable debt.
Debt advice service staff will tell you about the number of different ways you can manage debt that has become too much for you. They will even contact lenders and negotiate repayment of the debt on your behalf.
Their goal is to reduce the amount you’re paying out each month to take some of the pressure off.
Here are advice service website points of contact when you find yourself in unmanageable debt:
If the debt you have built up is very large and spread out over a number of different accounts, you may also wish to consider an Individual Voluntary Arrangement, a Debt Relief Order (not in Scotland), or bankruptcy.
How to always keep up with your loan repayments
There are steps you can take on how to always keep up with your loan repayments. Sometimes, these steps will be enough to prevent you from falling behind on repayments and, sometimes, despite your best efforts, you will still struggle to repay your loan after taking these steps.
Creating a monthly budget should form part of any plan on how to always keep up with your loan repayments. Log on to your online bank and check to see how much money you are being paid each month and how you are spending it.
You may want to consider switching to cheaper insurance and utility providers or downgrading your television subscription. Instead of buying a coffee from Starbucks first thing in the morning, perhaps you might find £15-20 a week in savings by making your own coffee in the canteen when you get into work.
Ideally, you should do this before taking out a loan. You may find that, over time, you would not need to apply for a loan and you might get the chance to build up a savings fund to cope with emergency situations like a car repair bill, funeral expenses, or an unexpected expense.
If you still need to take a loan out, you should be clear in your mind before you apply on how to always keep up with your loan repayments. If you are not sure you can repay a loan, you should not take one out as this will only increase your problems later on.
Finding yourself unable to repay a loan is a stressful situation. It is so stressful because no-one likes to be chased for money that they cannot afford to repay even though they have made every single effort they can to repay it.
It is always better to confront a situation where you are struggling to make payments to a lender head on. Be proactive and get in touch with a customer support worker at your lender as soon as you realise you are going to have a problem.