Debt Management can help control your finances
Contact us
0800 044 5407
Calls from mobiles are now free

Can you put a payday loan in a debt management plan

Can you put a payday loan in a debt management plan

A payday loan can be included in a debt management plan. The loan is unsecured and so can be treated in the same as any other bank loans you owe.

Included in this article:

Want more advice? Call us (0800 044 5407) or complete the form below and we’ll call you. It’s free and confidential

Including a payday loan in your debt management plan

Payday loans (also known as short term loans) are slightly different to other types of bank loans. They normally have to be paid back over a fairly short time (usually between 3-6 months). As a result, the amount you repay each month is relatively high.

Nevertheless, they are still unsecured debts. As such they can be included in a debt management plan (DMP) in the same way as any other loan you might have borrowed from your bank.

As long as your total debt (including any payday loans) is not to high and you can pay off the Plan in a reasonable amount of time, it can be an ideal way of getting back in control of these debts.

Once your Plan starts, you will need to cancel your payment with the loan company. If it is taken directly from your debit card, you may need to cancel the card by reporting it stolen to ensure no further payments are taken.

Will the payday loan company reject your Plan?

As with any of your creditors, a payday loan company has the right to reject your debt management plan. However, as long as you are offering to pay as much as you can afford, they will normally accept.

The amount you pay is determined by your disposable income. This is the amount left over from your total monthly income after all your reasonable living expenses are taken into account.

Your creditors will review your living expenses budget to decide whether the figures you have used for the calculation are reasonable for your circumstances. They will only normally reject the proposal if they feel your expenses are unreasonable and believe your payments could be higher.

If a payday lender were to reject your Plan, it can still continue and they still receive payments. Its just they are more likely to continue adding interest and use enforcement action. If this were to happen, you may need to review whether continuing to use a DMP is still the right option.

Could you leave the loan out of your Plan?

You can leave any of your debts out of your debt management plan and continue paying them as normal. However, it’s not usually a good idea, particularly with a payday loan.

The problem is that to prevent enforcement action, the monthly payment still has to be paid. But this is likely to be difficult due to the amount required.

Trying to continue paying these debts is likely to mean you can’t afford to set up a Plan for the rest of your creditors.

Ultimately there is no real benefit to leaving your payday loans out of your debt management plan. You don’t need to worry about being accused of fraud.

Given you took the loan in good faith with full intention of repaying it, the fact you now can’t afford to repay it is not fraud. It is simply a poor reflection on the lenders creditworthiness checking.

Need more advice about your payday loan and starting a debt management plan? Give us a call (0800 044 5407) or complete the form below. It’s free and confidential.

Arrange a call with a DMP Expert

    Need help to start a Debt Management Plan?

    Privacy Policy
    Your information will be held in strictest confidence and used to contact you by our internal team only. We will never share your details with any third party without your permission.

    2 thoughts on “Can you put a payday loan in a debt management plan

    1. Leslie P says:

      I want to sign up for a debt management plan. I recently got 3 payday loans. Can I still qualify if I recently got the payday loans.

      1. James Falla says:

        Hi Lesley

        It is certainly more difficult to agree a debt management plan if you have taken loans very recently (especially if you have not made any repayments).

        Normally I would recommend making at least one repayment if you can as this would help with the negotiations. However, if this is not possible, you can still do a DMP. At the end of the day, if you simply do not have the funds to repay these (and any other debts you owe), you can’t pay what you don’t have.

        Depending on your circumstances, there might be an argument to say that the lender should never have given you the loan because it was not affordable. If so, a threat to report their lending practise to the FCA (Financial Conduct Authority) might actually help the repayment negotiations go smoothly.

    Leave a Reply

    Your email address will not be published.

    Learn how your comment data is processed.