Home Budgeting What To Do When You Can’t Afford To Pay Back A Loan

What To Do When You Can’t Afford To Pay Back A Loan

by S1m
Pay back a loan

If there is one lesson that we all learn in life, it is that circumstances can change. One minute everything is fine – you have a great career and the world is at your feet. The next minute the company has gone into redundancy and you feel like everything is spiralling out of control. You may feel like you are alone, but it happens to a huge number of people. The best thing that you can do is take action. If you have found yourself in a situation whereby you are experiencing money troubles due to a change in your circumstances, your most pressing concern may be how you are going to pay back a loan you have taken out. Below, you will discover the important steps that you need to follow.

Assess your financial situation – Before you can begin to discuss your situation with your lender, you need to have a full understanding of your current financial situation. How much money do you have going in and out every month? How much money can you comfortably afford to pay your lender? Knowing this is imperative because it will stop you from agreeing to a new payment plan that is not suitable.

Contact your payday lender – The next step is to get in touch with your payday lender. There are rules and regulations that your lender must adhere to. They need to, for example, point you in the direction of independent and free debt advice sources. They also need to treat you fairly and with consideration, giving you a reasonable time to pay back the money you owe. To do this, they may suspend charges or freeze your interest. Your lender should also suspend the recovery of your debt for a reasonable period of time if you are in the process of developing a plan for repayment, whether on your own or with an advisor. In addition to this, your lender should be willing to accept small token payments temporarily if you find yourself in a position whereby repayments mean you do not have enough money left for essentials, for example, utility bills, mortgage or rent payments, and food. They are also not allowed to bombard you with text messages, emails, and phone calls. Make sure you keep copies of all of your correspondence too.

Cancel your recurring payment – Do you have a direct debit, which takes the loan repayment each month? You should cancel this payment if it is going to put you in the position whereby you cannot afford the likes of food and rent. And, no matter what you do, do not roll your loan over. This means that you will end up with even more interest and charges, and so you will only put yourself in a bigger financial hole. As per UK law, lenders are not allowed to roll over a loan more than twice.

Find out whether you are eligible for a payday loan refund – It is also imperative to find out whether you were mis-sold your loan in the first place. There is no denying that payday loan companies, in particular, have received bad press in recent years. Can I get a payday loan refund? This depends on the nature of your agreement, but it is worth exploring further. There are a number of ways in which a payday lender may be deemed to have misled you. This includes the following: encouraging you to borrow more money, taking money from your account without warning, being unclear about the total cost of repayment, allowing you to repeatedly roll loans over, harassing you with threatening messages and phone calls, and failing to assess your financial situation fully. They can also be to blame if they have not clearly explained potential default fees, late-payment fees, and other charges.

Get help from a free debt adviser – There are many free and confidential debt advice services for you to choose from, including Citizens Advice and National Debtline. Give them a call for further advice.

Hopefully, you now feel more prepared to tackle this situation head-on. There is no denying that it can be very worrying and stressful if you have found yourself in a scenario whereby loan repayments are due and you don’t have the money to fund them. Nevertheless, if you follow the steps that have been provided, you can make the best of a bad situation so that it does not spiral out of control.

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