My article on How to ask for a refund of payday loan interest looks at what to do if you had payday loans you couldn’t repay without borrowing again. It applies if you have repaid your loans already or if you are still repaying them.
But if you still have payday loans, what do you do about this month’s repayments? You can’t put in a complaint and then carry on borrowing!
Payday loans keep you trapped, paying interest every month to the lenders and not improving your situation at all. It may feel that they are keeping you going and that you can’t manage without them, but you need to cut through this and break free. When in a hole, stop digging!
If you try to muddle through, hoping a lender will offer you a refund so you don’t need a debt management plan, then you may end up in the position this reader had:
I put in a claim with Wonga for 48 loans between 2011-2016, they have offered me £2,900 – interest plus 8% on all loans 2011-2014. I have accepted this to try to stave off going under, it will be a massive help but I can’t help feeling that I could get a lot more for the later loans if I had the time to purse it with the ombudsman.
Unfortunately having accepted the offer for the 2011-14 loans, this reader now can’t go to the Ombudsman for the 2015-16 later loans. What he needed was a way of stabilising his current situation so he wasn’t forced to accept a low offer when with a few more months he could have got a lot more.
Look at a debt management plan
If you can make this month’s debt repayments and pay your other bills and expenses without borrowing more, that would be best. Your debts will start to go down and if you get a payday loan refund this will make it even faster.
But many people will find this very hard or impossible. In these situations a debt management plan (DMP) is often the best option. In debt management, your creditors are asked to freeze interest and accept a lower payment each month – depending on your situation this can even be a “token” £1 a month.
A good way to set up a DMP is to contact StepChange. StepChange will look at your full situation and will be able to say whether a DMP is suitable and what your other possible options could be.
In a DMP you make a single payment each month to StepChange, who then divide this between your creditors. They don’t charge a fee – all your money goes towards your debts.
Debt management can be a long term debt solution, but it is often used as a temporary measure if you think your situation may change soon.
If you make “affordability complaints”, your current payday loan debts may be reduced or written off. If you have had payday loan problems for a long while you may get refunds which will let you repay other debts. So after these complaint have finished, you may be in a much better position and you may have different debt options. You may even be able to end the temporary DMP and go back to repaying your debts.
What order do you do this in?
Going to StepChange isn’t instead of trying to get refunds back from the payday lenders, it’s just the first step so the next few months are more under control. A DMP should take a lot of the immediate pressure off you, you will then be able to make any affordability complaints and think properly about any refunds offered.
So if you are wondering what you should do first, I suggest the following order:
- talk to StepChange – let’s assume they think a DMP is a suitable option.
- cancel any Direct Debits, Standing Orders and CPAs that make payments to your creditors.
- StepChange will tell your creditors about your DMP, you don’t have to.
- start thinking about affordability complaints to the payday lenders. This doesn’t have to be immediate – you may prefer to wait until your DMP has “settled down” for a few months.
A few Dos and Don’ts
- DO tell StepChange about all your debts. Even if it’s the payday loans that are your big problem, this is the point to get all your debts under control.
- DO read the comments at the bottom of the How to ask for a refund article – it’s good to hear how other people’s claims are going.
- DON’T worry about contacts from the payday lenders. Just tell them StepChange will be handling your DMP – they really do stop calling.
- DON’T use a claims firm to ask for payday loans refunds. You really can do a better job than they can! Also if the refund you get wipes out your debt, that’s great… but it would then leave you owing the claims firm their large fees :(