Can a payday loan be included in a Debt Management Plan

Can a payday loan be included in a Debt Management Plan

If you are struggling with a payday loan, it can be included in a debt management plan. However you may also be able to consider alternative options.

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Are payday loan payments reduced by a debt management plan?

A payday loan is unsecured. As such these debts can be included in a debt management plan (DMP). Once the plan is set up, the payments to any such loans and any other included debts will be reduced.

If you are struggling with payday loan payments a DMP can really help. These debts are normally repaid over a relatively short period which means the repayment amounts can be very high. The Plan will reduce the payments to a level you can afford.

Starting a DMP will involve stopping your normal creditor payments. For a payday loan these are often taken directly from your debit card using a Continuous Payment Authority. You should be able to speak to your bank and instruct them to stop further payments from being taken from your card.

If your bank says is it unable to stop a continuous payment authority, one way of ensuring future payments are stopped is to report your card as lost. The card will then be cancelled preventing any further payment being taken

Can you leave the loan out of your DMP?

Usually it is not a good idea to leave any of your debts out of your DMP. Continuing to pay one creditor will reduce the amount you can pay the others. The included creditors may not like this and may mean they are more reluctant to accept your plan as a result.

Another problem especially with Payday loan debts is the repayment amounts tend to be relatively large. As such trying to leave the debt out of your plan and pay it normally may simply not be workable. You may not have enough money left over to pay your DMP.

Having said that it is possible to leave a creditor out of your plan if you wish. If you can afford to do do this, it may be in your interest to pay this debt off as fast as possible.

Once you have paid off a debt such as a payday loan, you can then pay more into your DMP. However legally you are not obliged to. You can chose to use the freed up funds to do whatever you wish.

Getting a new payday loan during a debt management plan

You might be able to get a payday loan while you are in a DMP. These types of lenders are often prepared to lend to people with poor credit ratings. Alternatively you may have been in your plan a long time and your credit rating has started to improve.

That said, it is not usually sensible to borrow more while you are still in your plan. You will then be faced with trying to repay the new debt while also maintaining the DMP payment. If you can’t do both and you stop your plan payments, the current agreement you have may fail.

If you are facing a financial emergency, you might be able to avoid borrowing more by speaking to your debt management company about taking a payment break. Managed properly you might be able to suspend your payments and free up the cash you need to cover the emergency without risking the plan.

Having difficulty paying your payday loan? Give us a call or complete the form below for more advice on your options.

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