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Loan Debt Problems

Payday loans first became popular in the United States and quickly spread across the Western World for people who need help with their funding short fall until their next payday. Since inception, payday loan companies have tweaked their technology and payment methods to ensure they can provide an exceptionally speedy service. Some lenders are claiming to be able to have the money in your bank within 20 minutes. Advertising by companies providing this credit often centres around receiving the money in your bank immediately and enabling you to spend it within an hour.

The payday loan is usually for less than £500 for first time customers and for a short term period (usually between 7-10 days). You can apply online or on the high street. The interest rates for payday loans can vary from 2,000% to over 4,000% in the UK. These high interest rates are one of the problems people have with cash advance loans, especially when it’s a struggle to repay the money borrowed. Whilst the initial loan may be small, the interest rate means the repayment can be large, particularly if the money is repaid late.

There are debt solutions available for people with payday loan debts which you can access via a registered debt charity. These solutions start with token payments towards your payday loan company each week. These token payment agreements may not be for the full amount however if the charity can get interest and charges frozen then at least the problem will not get worse and you will be repaying your debts.

If you have other unsecured credit debts then you may want to think about a debt arrangement scheme (Scotland) or debt management plan. These solutions require you to pay back all of your debt but over a longer than agreed period. This way, your creditors get back all of their money and they may even freeze interest and charges. The benefit for you is you will have negotiated with your creditors and helped to avoid the situation growing considerably worse.

An IVA or Protected Trust Deed would allow you to repay your debt, including any type of loan over an agreed period of time. If you maintain the arrangement you will be debt free in 3 or 5 years having paid back an affordable monthly amount. You would only repay a percentage of the money you borrowed via your payday lender and other creditors.

In a worse case scenario you would have to enter Bankruptcy to resolve your debt problem. This is rarely for people with just cash advance loan debts, but people who have multiple creditors with lots of debt. All of these solutions will have a negative impact on your credit file (a default will be added and last for 6 years making being accepted for credit in the future difficult).