23 Oct What Happens If I Cannot Repay My Payday Loan?
If you cannot make repayments on your outstanding payday loan on time, then you will incur additional fees and it could harm your credit score. Consequently, it is important that you fully understand the implications of defaulting on your loan.
If you are struggling, your first step should always be to contact your lender directly as soon as you can. Most direct payday lenders will offer you alternatives, such as delayed payment terms or partial payments, to help you get back on track.
Late fees will apply
If you end up missing a monthly payment, the lender will notify you within 24 to 72 hours in order to make your payment for the payday loan. If you fail to respond to any contact attempts, you can expect to receive a default fee of up to £15 in total.
The default fee is a late fee for missing a loan payment. It is possible for the lender to charge you for any missed repayment, regardless of whether it is 3, 12 or 24 months.
In addition, you will incur a daily interest, at a rate of up to 0.8% per day when the debt is outstanding.
Your credit score could be affected
Each missed payment on your payday loan is reported by the lender to one of the main credit reference agencies and it will appear on your credit file. This warns potential future creditors that you had a missed repayment which could make them less willing to provide you a loan in the first place.
Consequently, keep in mind that if you apply for other loans to pay off an outstanding one, the new lender will know this.
But it also worth remembering that if you make prompt loan repayments, this information will also be passed on to credit reference agencies and your credit score may improve.
Eligibility for future loans may be affected
Late payday loan repayments could affect your ability to get credit cards and short term loans in the future. This is largely because lenders are more likely to be hesitant to lend to you if they are concerned you will not be able to keep up with repayments.
What you should do
Plan and budget before applying– Badger Loans recommends that you have checked that you can definitely afford to repay your loan before making an application. When you take into consideration the potential fees and damage to your credit score if you can’t afford to pay back the loan, it is absolutely worth taking an additional 10 minutes to allocate a budget.
Speak to your lender – Contact your lender prompt, as they can give you a list of options that can help to reduce costs and the impact on your credit score. Generally speaking, the faster you contact them before the scheduled repayment date, the better it will be.
Set up an arrangement – You will find that some lenders will be willing to sort out an alternative arrangement or ‘pay plan’ so that you pay off your loan in smaller instalments that are more affordable for you overall.