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Consumer Rights.

Updated: 4 Mar 2021

I can’t pay back my payday loan, what can I do?

If you’re struggling to repay your payday loan, you should contact your lender as soon as possible. Regulatory rules mean lenders are obliged to help.
Which?Editorial team

What are payday loans?

A payday loan is a short-term loan that usually comes with high interest rates and charges.

The loan will be paid into your bank account and in most cases will need to be repaid in full at the end of the month.

Payday lending was originally designed to tide people over until their next payday, but some loans are now available for a longer period of time.

Payday loans are also sometimes called cash advance loans or check advance loans.

Lending guidance for payday loans

The Office of Fair Trading (OFT) irresponsible lending guidance requires lenders to treat borrowers in financial difficulty fairly with patience and tolerance, which essentially means they should work with you to come up with a plan to repay your debt over a reasonable timescale.

Any action your lender takes must also be proportionate. For example, they can’t try to repossess your house just because you haven’t paid your credit card bill.

If you believe that a payday lender has been irresponsible, you can complain about the lender

Payday loan customer charters

If you’ve borrowed money from a payday loan company, check if they’re a member of one of the main trade bodies, such as the Consumer Finance Association (CFA), the Finance and Leasing Association (FLA), the Consumer Credit Trade Association (CCTA) or the BCCA.

The main payday lenders have signed up to a customer charter which requires members to:

  • Deal with cases of financial difficulty sympathetically and positively
  • Tell you how the payday loan works and the total cost of the loan (including an example of the price for each £100 borrowed, together with fees and charges) before you apply
  • Freeze interest and charges if you make repayments under an agreed and reasonable repayment plan, or after a maximum of 60 days of non-payment

Help paying back your loan

If you’re struggling with a number of debts and need help, it’s worth speaking to a free debt advice organisation like Stepchange or National Debtline.

They’ll help you find the right debt solution for your personal circumstances and may help you negotiate new or reduced payment terms with your payday lenders.

Don’t use a commercial debt-management company. There is plenty of free, independent debt advice you can use.

Visit the Which? Money guides more guidance on the best personal loan options for your circumstances and how to manage debt