Wonga, the poster-boy for payday loan companies, has entered a period of turbulence, with the founder and chief executive both departing the business, and reports of falling profits. Payday loan providers have a very poor public image, persistently attacked for the sky-high interest rates they charge on their loans. If Wonga’s problems are anything to go by, the tide may be turning against these companies, but many people still find themselves resorting to this kind of service on a regular basis. Here’s how to emerge from debt, and avoid this potentially ruinous move.
Don’t feel embarrassed about discussing your money worries with friends, family or professional advisers. Many people from all walks of life hit problems with debt at some point, and what those who criticise often fail to realise is that they themselves may be only a few missed paycheques from disaster. If you’re looking for professional help in getting clear of debt, try talking to an organisation such as the Money Advice Service or the Citizens Advice Bureau for free, impartial advice. Be aware many of the firms that advertise on TV or online will often charge extortionate fees, simply making the matter worse.
Obviously, if you’re considering taking out a payday loan, then things must already be pretty tough and you may have cut spending to the bone. But anything else you can temporarily forgo, the ‘little luxuries’ we all afford ourselves, such as cigarettes or the daily newspaper, can help bridge a funding gap. It may make you feel miserable to go two weeks without smoking, or a drink on a Friday night, but if it stops you falling into the clutches of payday lenders then it’s totally worth it.
Instead of hiding problems from your creditors, address the issue head-on. Explaining to them that you’re in financial difficulties and struggling to meet your obligations will give them confidence in your integrity. It may be possible to negotiate a payment plan that keeps you away from more debt while still giving them a return.
Other sources of income
Consider funding from less conventional routes. Perhaps the company you work for might be able to help with a temporary loan, or an advance, to help you. It’s worth asking for a raise, or if not, then more hours. If you’re in the military or a unionised industry then there may be a loan scheme you can access for help. The Church of England has also launched a credit union network.
If you’re feeling overwhelmed by debt, that it’s spiralling out of control, then it’s best to consolidate it all in one place if possible. Get your last six months of bank statements and establish exactly what payments are going out, and when. Are any unnecessary? For example, you may still be paying for insurance on white goods or a computer you no longer own. Then see if you can apply for a loan or credit card that you can use to pay everything off at once, preferably one with a deferred interest rate. That way you will have just one monthly payment going out, and you will know what date, so you can manage it a lot easier. Talk to your bank or a credit union first as these may be the places to get the best rates, and if not, always shop around for a good deal.
On the off-chance you do come into any money, a Christmas bonus say, or a small lottery win, put as much away as you can so that you always have a little safety net. But don’t forget to treat yourself once in a while too, austerity isn’t fun.