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:
- Including a payday loan in your debt management plan
- Will the payday loan company reject?
- Could you leave the loan out of your Plan?
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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.
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