Payday Loans

payday loans

What is a Payday Loan?

A payday loan is a short-term loan that allows individuals to take out loans in order to stabilise their financial situation quickly. 

Payday loans are generally for small amounts (£50 up to around £1000) and are often used for emergency payments or unavoidable expenses that come up. Ideally, these payments would be covered by an emergency fund or savings, but this is not always feasible for millions of people.

Payday loans can be used to cover these emergency expenses and ensure you’re able to pay rent/mortgage payments, utility bills, and other key day-to-day expenses.

How Do You Get Into Payday Loan Debt?

Payday loans have some of the highest fees and interest rates of any finance option, due to their low loan amounts, short payment terms, and the fact they are often riskier loans. If you miss a payday loan payment, need to extend your payment terms, or aren’t clear about the terms and conditions before accepting a payday loan agreement, you can find yourself unable to make regular repayments and be in significant financial distress relatively quickly

For payday loans, in particular, missing payments can be very dangerous for your finances. Because of the high fees and interest levels associated with payday loans, the amount you owe can increase rapidly to an unmanageable amount. 

This is where personal debt specialists like NDH Financial can help. By using our expertise in personal insolvency solutions, we can help you improve your financial management and reduce the mental burden that payday loan debt can have. To find out more, contact our team today.

Options If You Cannot Pay Your Payday Loan

Unlike utility bill debt or council tax debt, for example, payday loan debts are not considered priority debts, but they can still escalate very quickly, putting you in an incredibly difficult financial position. There are options available to you:

Loan Rollovers - Also known as refinancing, rolling over your loan allows you to delay the date that your debt is due to be repaid. However, it can be very risky as there are considerable additional costs associated with refinancing a payday loan, and in most cases, a debt advisor will advise against loan rollovers unless you are very confident you will be able to pay the rollover and associated interest/fees in full when they are due.

Stopping Payments - In some cases, the best option is to temporarily stop payments to a payday loan company. This should only be done if you have, or are working on, putting a debt solution in place, but can be done to delay repayments being taken if you can’t afford them. You should never do this before speaking to your provider and a debt help specialist, however.

Applying for a Loan Refund - Because of the nature of payday loans, they are highly regulated and there are stringent rules on who they can and cannot approve for a short-term loan. If you have been accepted for a payday loan you were unlikely to be able to afford, you may be able to apply for a loan refund.


An IVA (Individual Voluntary Agreement) can be used to consolidate your debts, communicate with creditors and reduce the mental burden of debt, including payday loan debts. Alternatively, there are other options for dealing with your payday loan debts, such as entering into a debt management plan, petitioning for bankruptcy, or applying for a Debt Relief Order.

Payday loan debt is unsecured debt so can be incorporated into your IVA. This will prevent creditors from coming after you with debt collectors or through county courts and gives you the space and breathing room you need to get your finances back in order. 

Payday loan providers don’t have to agree to the terms of an IVA, but the majority of the time they will, as it means they get the majority of their money back and save on the time and administrative costs of working with debt collectors or courts.

To learn more about how IVAs can help, contact the IVA specialists at NDH Financial. Our Insolvency Practitioner and the team have extensive experience working with individuals with payday loan debt, as well as the preparation and approval of IVAs.

Get in touch today

NDH Financial can help free you from the shackles of your debt. 

Call us on 0800 002 9051 or apply below.

If you already have an IVA through us, please contact us on 0800 002 9061.

What Happens if you Don't Pay a Payday Loan?

Failing to pay back a payday loan can have significant effects on your credit history and debt collection agency. If you're struggling to pay back your payday loans, NDH Financial can offer our expertise to help you put together a manageable plan to repay payday lenders.

Some issues that you will come across if you are unable to keep up your monthly repayment from payday loan lenders include:

Additional Fees

If you fail to repay your payday loan, additional fees may be charged. These fees are known as non-sufficient funds fees (NSF) and are levied when you haven't got enough money to cover repayment.

Debt Collectors

If you continue non-payment, your lender will work with a debt collector to get the payday loan repayment. Your lender will attempt to collect payment for an approximately 60-90 day period. If you're unable to pay them within this period, they'll likely employ a third-party debt collector. 

You may get phone calls and letters from them regularly until they've received the money, and they may be more aggressive and intimidating than your original payday loan provider. This can be very stressful and cause significant money worries and anxiety, which only makes the situation worse.

Credit Score Impact

If you cannot pay back your payday loan, this will impact your credit score. If you successfully repay your initial loan regularly, payday loans don't harm your credit score, but if you default on a personal loan or your account is given to debt collectors, this will sit on your credit report for some time, depending on your circumstances.

Difficulty Getting Credit In Future

Payday loan defaults can appear on your credit report for up to seven years. This means that other lenders in the future will see you as having a bad credit history, and you may find it difficult to get approved for long-term borrowings, such as a business loan or mortgage.

Court Action

Even if you default on a small amount of debt, it is possible that a payday loan company can take you to court for nonpayment.

FAQs about Pay Day Loans

Do payday loans help your credit?

Yes, a pay day loan can help your credit score, as long you are comfortably able to pay back your payday loan amount, including interest.

Like all loans or lines of credit, if you miss payments or your loan defaults and is sent to a debt collector, this will appear on your credit file for up to seven years.

However, it's worth being careful, as taking out regular payday loans may have a negative effect, even if you pay them back on time. Taking out regular payday loans indicates to lenders a recurring issue with cash flow, which makes you a riskier option for longer-term borrowing, as payday loans are meant to be used as short-term financial solutions. If you require longer-term financial help, there are a range of different, affordable types of loans that are better suited to your needs and won't raise red flags for potential lenders in the future.

Does debt consolidation work on payday loans?

Yes – just like other types of debt and credit, you can consolidate multiple small short-term debts, including payday loans, into one larger long-term debt, and have this paid using a debt consolidation plan. This allows you to repay all existing debts with one single payment, which makes managing them considerably easier.

Can you put payday loans on a debt management plan?

Yes, payday loans are unsecured debts, which means they can be put on a debt management plan (DMP). Like most unsecured debts, any single lender can refuse their debt be put on a DMP, but this is very uncommon, as most creditors will get more through a DMP than they would through the extra charges and interest they would get by continuing to chase the outstanding balance.

How long do payday loans stay on credit history?

Payday loans stay on your credit history for up to six years. If you pay your loan amount within the original repayment periods, this can actually look better to lenders than having no credit history! However, if you are a regular payday loan borrower or don't pay back your loan on time, this will show up as a negative on most credit reports.

Can I get a payday loan if I didn't pay one back?

Yes, you can get a payday loan even if you have another outstanding loan. In fact, some estimates show that 27% of payday loan borrowers have more than one loan out at once.

There is no law to say you can't have multiple payday loans. However, most payday loan lenders will not give you two loans at once, so you will have to work with different providers. You'll also have higher interest rates on your second or third loan, which can make it incredibly difficult to get your debts under control, and you may find yourself in a cycle of debt.

For this reason, debt advice organisations and debt advice providers will always recommend against taking out multiple payday loans and offer alternatives to a short-term loan to prevent additional debts from piling up.

What does refinancing a payday loan mean?

Refinancing (or rolling over) a payday loan essentially means you take out a new loan to cover your original loan. If you refinance a payday loan, when the original loan is due you will have finance fees due, however, the original loan amount won't be due until your refinancing agreement (the new loan) is due.

When you roll over or refinance a payday loan, it is generally over quite a short period of time. Refinancing is a debt solution you should only use if you know your financial situation will have changed by the time the refinance is due. 

This is because the fees will increase the more you refinance, and is one of the quickest-growing forms of debt.

Find out whether NDH can help you

At NDH Financial, we have extensive experience when it comes to helping individuals manage their payday loan debt and get back on track to becoming financially independent, stable and healthy.

To speak to an experienced, personal debt specialist, please don’t hesitate to get in touch.

Do You Have Any More Questions?

Our IVA Learning Hub Can Help

We know you might have questions and that’s fine.

We can answer most of those on our call.

But we’ve also built our learning hub so that you can learn more about an IVA and see if one is right for you.

Click below to check it out.