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I Can't Pay My Payday Loans What Will Happen

Personal_Finance / Debt & Loans May 28, 2020 - 02:49 PM GMT

By: Sumeet_Manhas


Many short-term payday loans have harsh terms. These loans are designed to give you a short-term cash injection that you can pay back on payday. However, many of these loans can result in harsh credit terms if you fail to pay back in time. However, there are options for those struggling with debt. In the UK, your first line of support should always be the Money Advice Service.

What Happens If You Don't Pay Back A Payday Loan

Usually payday loan providers will charge a late payment fee of £12-£20 if they do not receive money. On top of this, a payday lender will usually put daily interest on your loan of 1%. This balloons shown in the example below.

  • Day -1 - £1000 loan owed
  • Day 0 - £1000 - loan defaulted
  • Day 1 - £1010
  • Day 2 - £1020.10
  • Day 3 - £1030.30
  • Day 4 - £1040.60 
  • Day 5 - £1051

This means that just after 5 days of defaulting, you could have added 5.1% to your overall debt owed.

How To Get Our Of UK Payday Loans Legally

While it is difficult to write of your debt entirely, stopping the daily interest rates can be done in most cases.

The best thing to do is to contact the payday lender and explain your circumstances.

Payday lenders may have signed up to a customer charter than makes them follow more stringent rules to:

  • Have sympathy for cases of financial difficulty
  • Tell you upfront about costs of loans
  • Freeze interest rates and/or charges if you agree to a payment plan or after 60 days of non-payment.

Either way, it is essential that you contact the lender straight away to find out what options you have.

Other options are available, such as contacting a debt charity like Citizens Advice Bureau or StepChange. These charities can offer free advice regarding your legal rights with regards to payday lenders.

Can Payday Loan Companies Send Out Bailiffs?

Yes and no. Bailiffs will not collect payday loans unless the payday lender has taken you to court and received a County Court Judgement that you have failed to pay.

Can Payday Loan Companies Take You To Court?

No. Payday lenders will deal with debt collection agencies over the courts as the process for going through a court is difficult for payday lenders.

Can I Negotiate My Debt?

Absolutely. Payday lenders are likely to respond positively to negotiations. They want to get their money and sometimes even offer to settle for less than you owe. Make sure you get this as a written agreement as this will hold up in the rare case that a payday loan company pursues you for the full amount after a settlement agreement.

What Are My Rights If I Am Harassed By Payday Loan Companies?

We spoke to Graham at for advice on harassment by payday lenders. Here is what he had to say.

Firstly, you need to find out if you are being harassed. The Citizen’s Advice Bureau. Here is a list of what counts as harassment by a creditor. If you have indeed been harassed by a payday lender there are several things you can do.

Collect Evidence

Collect evidence as this could help your complain.

Make sure you record the volume, date and time of correspondence alongside what was said. Keep a copy of any documents and ask witness statements from people who have may have witnessed any harassment.

Complain To The Payday Lender

Send over all of your evidence to the payday loan company and remind them that harassment is a criminal offence. Ask them to stop and state that you will be takikng legal advice if they do not desist.

This is a real hassle for a payday loans company as they have to respond within 3 business days as well as report the complaint to the financial conduct authority.

Complain To A Trade Association

Some payday lenders may be part of a trade association. These trade associations may belong to the Standards of Lending Practice. This sets out principles for members to follow, such as:

  • Avoiding harassment
  • Promoting debt advice
  • Supporting vulnerable debtors
  • Using debt collectors who also follow the Standards of Lending Practice

Complain To A Citizens Advice Consumer Service

Complaining directly to Citizens advice can help you get a complaint through to local Trading Standards. This will prompt an investigation into if offences have been committed.

Complain To The Financial Conduct Authority

The Financial Conduct Authority cannot take up individual cases. However, they can remove a firm’s authorisation or fine the firm. Before getting to this stage you may wish to remind that payday loan company that they could be breaching FCA rules and that this might risk their FCA authorisation.

By Sumeet Manhas

© 2020 Copyright Sumeet Manhas - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

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