If you’ve taken out a payday loan for some short-term breathing space but are struggling to repay it, support is available. It’s important to understand your rights and what actions you can take to try and regain control of your finances.
Here are the steps to follow if your payday loan repayments have become unmanageable:
1) Know your payday loan rights
The Financial Conduct Authority (FCA) regulates payday lenders to ensure better consumer protection. Rules in place include:
- An interest cap that states lenders can’t charge more than 0.8% interest per day
- Maximum default fees for missing a payment are capped at £15
- The total repayment – including interest and fees, cannot exceed twice the amount borrowed
For example; borrowing £100 shouldn’t accrue more than £24 in interest over 30 days and can’t cost you more than £200 in total.
2) Talk to your payday loan lender
If you think you’re going to fail to make a repayment, don’t ignore the problem – inform your lender as soon as possible. Reputable firms (like those authorised by the FCA) are obligated to treat customers fairly and may offer solutions like repayment plans.
Check that any suggested plan aligns with your capacity to pay – or propose your own reasonable structured schedule. Ideally, payday loan companies should help you manage repayments without causing undue hardship.
3) Consider cancelling continuous payment authority
If your payday loan is being repaid with a debit card, it may be happening via continuous payment authority (CPA). This enables your lender to withdraw funds directly from the account linked to your card, whether you’re able to cover the payment or not.
You can regain control of your finances by preventing these withdrawals by contacting your bank directly. This won’t cancel your debt or obligation to repay the loan, but could buy you some space to make alternative arrangements.
It’s illegal for any CPA transactions to continue after you’ve withdrawn consent and any taken must be refunded in full.
4) Seek independent, professional debt advice
If managing your payday loan debt is becoming overwhelming, it’s time to seek independent, professional advice. You can also contact Citizens Advice to access confidential, free guidance on facing financial challenges. If you believe your lender has treated you unfairly, or didn’t carry out proper affordability checks, you can complain. This should be directed to the company at first, then escalated to the Financial Ombudsman if unresolved.
Ready for what’s next?
Whatever steps you take to make your payday loan repayments manageable, be aware that any missing or late payments can affect your credit rating. To minimise this impact on any future borrowing (and reduce your stress), prioritise communication with your lender and seek professional advice.
If you’re struggling with loans, please don’t hesitate to reach out and get free*, confidential debt advice from our expert advisors.
*Our advice is free, but if you sign up for a debt solution with us, fees will apply.
Can’t Repay a Payday Loan: FAQs
If you’re struggling to repay a payday loan:
- The lender may add interest or late-payment charges, although legal limits apply to how much you can be charged.
- Some lenders instruct debt collection agencies or take further legal action.
- Your credit score may be affected and it will get harder to take out new credit in the future.
Yes. A payday loan lender can take court action to recover an unpaid debt, although they will normally contact you and try to arrange a repayment plan first. If the lender successfully obtains a County Court Judgment against you, this may affect your credit report and could lead to further enforcement action if you do not pay as ordered.
Contact the lender as soon as possible if you cannot afford the repayments. They should consider your circumstances and treat you fairly.
Cancelling a Continuous Payment Authority (CPA) stops the lender from automatically taking funds from your bank card, but it does not cancel the loan or remove your responsibility to repay the outstanding debt.
