Anything which can go wrong will go wrong – and at the worst possible time! (Murphy’s Law).
Cars, washing machines, central heating… you name it. Breaking down just when you need them most and costing an arm and a leg to fix or replace. But how are you going to pay for it?
That’s when the Payday loan company advertisements offering instant cash sound so attractive. Payday Loans are very big business. They use celebrities to promote their companies and often sponsor sporting events and clubs, but they can be a lot less friendly if you fall behind when it comes to repayments.
Payday Loan companies offer short term loans for small amounts of money. They are not a good idea if you are going to need more time to repay than the month they usually offer.
Loans are available from high street shops and internet sites and can be easy to get, but interest rates are very high. There may be other ways for you to sort out your short-term money problem so think about the alternatives before you borrow. Here are three suggestions:
1. A loan from a credit union is more affordable – check if there’s a credit union in your area.
2. If you have a bank account, you may be able to agree an overdraft. But be careful of going overdrawn without permission.
3. If you’re on a low income and need money in an emergency, you may be able to get help from the Social Fund.
If you do decide to get a payday loan, shop around and compare the interest and charges before you borrow. Make sure you are clear about what will happen if you can’t pay it back. Usually you’ll be given up to a month to pay back the money you borrowed, plus interest.
The most common way to pay back a payday loan is through your bank debit card. When you get the loan, you agree to let the lender take the money from your bank account. This is called a continuous payment authority (CPA).
If there isn’t enough money in your account to repay the loan on the agreed date, the lender may keep asking your bank for all or part of the money. Charges will be added for late payment. If you can’t afford to repay the loan you can instruct your bank or card provider to stop the payment being taken. You must do this at least one day before the payment is due.
You do not have to inform the Loan Company before you stop payment, but you must get advice on paying off the debt. You cannot leave it and hope it will go away. Payday loan lenders have been known to start to telephone at all hours demanding repayment and they may also contact your employers and anyone else they think might put pressure on you to repay.
If you are having problems paying back the loan the lender may offer you longer to pay. This is known as a loan extension or deferral. Beware of doing this! If you extend the loan you will have to pay more interest and there may be extra fees. You may find the amount you owe suddenly becomes a lot more that the amount you originally borrowed.
Most payday loan lenders are supposed to follow a Good Practice Customer Charter. If they don’t follow the Charter, you can complain. You should first contact the lender and try to sort things out.
If you are still not satisfied, you can make a complaint to the Financial Ombudsman Service (FOS). If the lender is a member of a trade association, you can also make a complaint to them.
Don’t let short term debts leads to long term. See http://www.citizensadvice.org.uk/index/campaigns/current_campaigns/paydaylenders.htm