What to do if you cannot pay back a payday loan to a payday lender

You have recently borrowed money from a legitimate and registered payday lender. You had every intention of paying the payday loan back when you borrowed the money but you have an emergency and you cannot pay back the payday loan on time. Yes, you had an emergency when you borrowed the money but now your car has broken down again and you cannot get to work. If you miss work you will not be paid. If you are not paid… well, you get the drift.  What do you do?

The first step is to contact your payday lender. Explain your situation. At this point we hope that you used a registered payday lender! Why? Because registered payday lenders follow a code of conduct. Registered payday lenders are in business to make money and earn a living, sure, but most of them understand that things can go wrong.  Having said that, they cannot understand your problem if you don’t communicate with them!

Whenever you have a creditor you cannot pay you need to communicate with the creditor to make a plan to pay off your debt and a payday lender is no different.

The only thing the payday lender can do is to offer you longer to pay. You do not want to roll over your loan for too long because the interest will compound and accumulate. The loan can easily spin out of control because of high compounding interest if you take too long to pay the debt off. Payday loans are designed to be short term loans and the interest is higher than many other forms of borrowing money because of the risk factor to the payday lender. There is a risk factor for the payday lender because they are giving you an unsecured loan which means they have nothing to attach if you default on the loan.

If you feel that you will not be able to pay back the payday lender for a length of time then get advice. We suggest that you get advice from one of various charity organisations so you don’t have to pay for the advice. In the UK there are enough organisations to turn to so it is not necessary to pay for debt help advice which would only compound your problem.

You could contact the Citizens Advice Bureau if you live in the United Kingdom. Click here for more information: Citizens Advice Bureau (Payday Loans).

You could also get information from the Office of Fair Trading which is run by the government.

Do yourself a favour and do not ignore the problem. If you cannot pay your debt back to a payday lender keep in contact with the lender, get advice and take control of your finances.  It is a fact that escalating debts gather momentum very quickly and the results are not pleasant.

In summary:

  • Registered payday lenders are often sympathetic so do not be afraid to approach them if you have a problem paying back a payday loan.
  • Ask for an extension but do not extend the loan for more than one month due to compounding interest.
  • Get help from a charity or government organisation if your debts are out of control. You can easily get free help online or you can arrange to meet with them.