Payday Loan Debts
If you can stay in control – they can be a quick and easy form of available credit, but of course better budgeting and making ends meet will always be a better solution.
What is a Payday loan?
A payday loan is a short term credit agreement that is expected to be paid back usually between one and 30 days. This name can apply to any short term lending (up to 3 months) and payment dates don’t necessarily tie in with pay days. Interest can be very high and the overall cost of lending expensive; especially so if payments are missed.
Important: If you’re relying on payday loans for day-to-day living costs – you may benefit some debt advice.
Are payday loans all bad?
You should only consider a payday loan if you are certain you can meet the repayments, and if you do default for any reason that it will not cause you financial difficulties that you cannot quickly rectify.
In some cases – taking out a payday loan can make sense.
Say you need £100 to pay towards getting a car fixed, otherwise you can’t get to work.
If you borrow £100 for 14 days and pay back on time, you will pay no more than £11.20 in charges and interest. This limit is imposed by the regulator.
That may be cheaper than going overdrawn at your bank and having an important direct debt fail.
Paying regular bills with a payday loan ?
If you’ve mounting debts you are attempting to pay – and you are considering a payday loan as a stop gap – then don’t. You need professional debt advice.
Can I include a payday loan in an IVA or Bankruptcy?
Yes is the simple answer.[show-iva-cta]For an IVA proposal to be rejected, 25% of the creditors by value of the debt must vote against it. Any individual payday lender is likely to be owed only a small fraction of the total debt of the IVA and therefore would not be able to block it alone by voting against your proposal.
A payday loan is an unsecured loan and can be included in a Bankruptcy/IVA like any other unsecured debt.
The exception to this being if the loan is secured, like a log-book loan or if the loan has a guarantor. In these cases the payday loan company can repossess the vehicle or seek payment from the loan guarantor.
If you’re a guarantor for a payday loan (such as Amigo loans) then you are liable for the debt and you can include it on your own IVA or Bankruptcy.