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Debt advice when you’re burdened with a payday loan or loans that have been rolled over

Payday Loan Debt overview

Payday loans are a form of short-term, high interest lending. This form of finance typically involves a single release of funds, with short payback terms of between two and four weeks. The money is paid direct to your bank account, with the repayments including all interest and charges.

According to research, the majority of borrowers use this form of credit in a way that damages their financial situation, with the average lender taking out six loans every year, from two or more lenders.

Despite recent changes being made in the regulation of payday loans (which you can read about here), Payday Loans continue to trap people in a sea of mounting debt.

The advantages of a Payday Loans as a credit solution

  • Payday loans are among the quickest forms of finance around, with most applications processed within a matter of hours.
  • Because they are so quick, they can be an effective solution for paying for emergency requirements, such as a car repair or urgent travel.
  • Payday loan applications usually require little in the way of documentation.
  • Because the lending criteria is so low, even those with the poorest of credit records have a reasonable chance of being approved.

Worried about debts that won't go away?

The disadvantages of a Payday Loans as a credit solution

  • Payday loans are among the most expensive forms of finance, with an average APR of 1500%, compared to just 22.8% APR for the typical credit card.
  • Because of the ease of access to Payday Loans, it can be easy to fall into financial trouble without the consumer really realising just how badly their debts are spiralling.
  • Payday loans can damage your credit even if you keep up with all your repayments. This is because this type of credit is regarded by some lenders as an indicator of financial problems.

Debt help tips for tackling Payday Loan debts

  • Contact your Payday Lender as soon as you know that you may miss your next repayment. They are legally required to:
    • Provide a list of free, independent debt advice bodies and charities.
    • Suspend the recovery of the debt for a period of time, allowing you to come to a repayment arrangement.
    • Treat your circumstances with due consideration, this may involve freezing any interest and charges.
  • In certain circumstances you should seriously consider cancelling the recurring payment if it means you are left unable to pay for essentials such as:
    • Groceries
    • Rent
    • Your mortgage
    • Utility bills
  • Do not agree to roll your loan over into the next month. This will undoubtedly involve additional charges and interest, increasing the total amount to be repaid.
  • Seek help from a free, trusted debt adviser, such as:
  • Remember – your Payday Lender should not:
    • Call you at your workplace without having given specific permission to do so.
    • Discuss the details of your debt with employers, colleagues or family.
    • Refuse to work with a debt agent or charity that has been granted permission to act for you.
  • Be aware of the potential debt solutions that could resolve not only our Payday Loan problems, but other debts too. Explore your options on our debt solutions page.

IVAs – A potential debt solution for Payday Loan debt

An Individual Voluntary Arrangement can be thought of as a type of debt settlement that could be a solution for your payday loan debt. Running over the course of either five or six years, an IVA is suitable for those with a minimum debt level of £5,000, owed to two or more creditors.

*An Individual Voluntary Arrangement (‘IVA’) is subject to the customer meeting qualifying criteria and gaining creditor acceptance. Monthly IVA payments include fees and may differ to the example provided, based on the assessment made of your own personal circumstances – these fees will be clearly explained to you in writing by your IVA company. Debt write off amounts are subject to creditor acceptance and vary by individual customer based on their own financial circumstances, and are applied upon successful IVA completion.

Substantiation example, Someone owes £60,000, they pay £100 over 60 months which equals £6000, write off amount would be £54,000 which is 90% of total debt level. Upon submitting your details on this website we will pass your details to one of our approved partners as this website does not give any advice.

Free debt counseling, debt adjusting and credit information services are available from the Money Advice Service.

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