With your loan consisting of monthly repayments, if you miss an upcoming collection, you will usually be notified and typically have around 24-72 hours to make repayment. However, if you do not respond to any text messages or emails following up repayment and you do not make a payment, you can expect a default fee of £15 maximum.
This is a ‘late fee’ for missing a repayment and can be charged for any missed repayment during your loan term, whether it is 3, 12 or 24 months.
You can also be charged a daily interest rate of 0.8% per day maximum for any days that the loan continues to be outstanding.
Every time you miss a repayment on your payday loan, this information will be reported by the lender to one of the main credit reference bureaus and it will update on your credit file. This is important as it alerts future creditors that you had a missed repayment and therefore, they may be more aware lending to you in the future.
So if you quickly try to apply for other loans to pay off your existing one, the new lender will know that you have a payment outstanding.
Similarly, if you repay your payday loan on time, the information will be sent to credit reference agencies and your credit score can improve as a result.
Failing to make repayments on time for your payday loan may affect your ability to obtain future credit cards and short term loans on time.
This is because future lenders may treat you with caution and be hesitant to lend to you if they believe you cannot keep up with your repayments.
Many lenders will require you to pay off your existing loans before being able to take out new ones.
Plan and budget beforehand – It is important to make sure that you can afford to repay your loan prior to applying for one. We appreciate that in the heat of the moment and the need to pay for an emergency expense, you may wish to apply for a quick loan.
However, given the potential fees and impact to your credit score, it is worth taking an extra 10 minutes to allocate a budget and put money aside to pay off your loan each month on time. Most customers will use their income from work to pay off their loan and planning how you will spend your income will be a worthwhile exercise.
Speak to your lender – Speak to your lender as soon as possible and they should be able to give you a list of options which will help you minimise costs and reduce damage to your credit score. Most payday lenders have a phone number on their website or you can email them directly. The sooner you can contact them prior to your scheduled repayment date, the better.
Set up an arrangement – Lenders can typically offer you some kind of arrangement or ‘pay plan’ so that you pay off your loan in smaller, more affordability instalments e.g instead of paying off £100, you pay £25 per month over 4 months. Please note that this may impact your credit score.