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Dealing with payday loan debt

If you’re struggling with payday loans it is probably a sign that you need help, particularly if you have more than one loan. Trying to borrow your way out of debt will only make you situation worse and we’d never recommend that you take out a payday loan to pay your debts.

Sometimes you might need access to extra money. If you're considering a payday loan you should always look at your alternatives to see if there are more affordable ways to borrow money.

How do I deal with payday loan debt?

If you’ve taken out a payday loan and you can't repay it, don’t take out another debt. Most lenders take your bank card details so they can take payments from your account. This types of payment is called 'continuous payment authority' (CPA).

If the payment is declined by the bank some lenders will attempt again. However they are only allowed to attempt to deduct funds twice, unless a rollover has been agreed between you and the lender.

If you need money to pay for food, bills or other credit taking out a payday loan may get you through this month. But next month you’ll have the same outgoings and the payday loan debt on top.

We’ve seen an increase in people coming to us for help with multiple payday loan debts. This cycle of borrowing only leads to a larger debt problem.

If you’re in this situation, you should cancel your payday loan payment to stop the money being taken from your bank account. You can then get expert debt advice on how to deal with your debts.

Our MoneyAware site has lots of advice on cancelling payday loan payments and steps to help you get out of payday loan debt.

Need help with payday loan debt?

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What is continuous payment authority?

When you give your credit or debit card details to a company, you are authorising them to take regular payments. This is known as a ‘recurring transaction’ or ‘continuous payment authority’ (CPA).

They work like direct debits, but can be very difficult to cancel and they don’t offer the same guarantee if the amount or payment date changes. This means companies can take as much as they like without giving you notice. Payday lenders can't make more than two attempts to deduct money from your bank account by means of continuous payment authority unless a rollover has been agreed.

What are rollovers?

If you have taken out a payday loan and you're coming to the end of the repayment period, the lender may offer you a chance to roll the balance over for another month. This might sound great in principle, but rollovers involve additional costs and charges which can often make things more difficult.

Rules state that lenders can't rollover an outstanding payday loan balance more than twice.

If a rollover occurs, the lender must send you an information sheet with contact details for various debt advice organisations.

Help with payday loans

We can provide free help and advice if you're struggling with payday loan debt. These loans are advertised as an easy form of credit and if the full balance can be paid on time then they can be used responsibly. If you can't afford repayments then they can lead to a more serious debt problem.

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Our online debt advice tool, Debt Remedy, offers an assessment of your budget and tailored debt solution in about 20 minutes. It’s free, available 24/7 and is completely anonymous. You can also contact our free Helpline to get advice over the phone.