Wednesday, February 8, 2012

Payday Loans Increase the Need for IVA Advice

IVA advice firms categorise debts in different ways. Some debts are more important and are described as being priority debts. Other debts should, in theory, only be repaid once priority debts have been dealt with. A mortgage or rent payment is clearly a priority debt in the eyes of anyone who provides IVA advice. Non-payment of housing costs could lead to homelessness, a generally avoidable outcome. Payday loans (like a payday loan, credit cards, store cards, or a normal bank loan) are non-priority debts. Of course you should pay them if you can afford to, but only after you have covered essentials like your mortgage or rent.

The knowledge of IVA advice professionals does not extend as widely as might be hoped. Individuals who are facing mounting debt problems often don't find it easy to break down a financial problem methodically as described. That's not surprising when you consider the huge potential costs (in interest and charges) associated with not repaying a payday loan. It's also not surprising if the means for direct collection of the money owed is granted to the payday lender at the point of borrowing.

The end result is that even when people cannot really afford to, a payday loan is often fully repaid. Frequently this leaves people with insufficient funds to pay their mortgages or rent so, if they can, they must find the money somewhere. What's the easiest way to get the money? Taking out a payday loan seems to have fitted the bill for a million people around the UK in the past year.

This type of borrowing is totally unsustainable as it results in a repaid build-up of debts that eventually will have to be dealt with. This is the point at which IVA advice providers, debt management companies and debt charities are contacted by an individual who has come to the realisation that they cannot cope financially any longer.

The build-up of payday loan debt is not fully down to the need to fund essential costs however. IVA advice professionals report that their clients have received "special offers" from payday loan companies to get quick cash for a summer holiday, for their birthday, or for Christmas. Anyone who has struggled financially for a period has probably done without many "luxuries" and cannot be anything other than tempted for some short-lived financial freedom. Inevitably some people succumb and find that they are further in debt.

If you're reading this article and are worried about your personal finances, please don't find yourself falling prey to rapacious payday lenders. Where debt is already causing problems the addition of a payday loan will almost certainly make things worse and more painful in the future. A better move would be to contact reputably sources of debt or IVA advice in order that you can establish which options are open to you to bring your financial affairs back under control.

5 comments:

  1. It’s true that there are some debts which are more pressing than others. Your rent and bills, for example, are a top priority. IVA Advice can be useful for helping you sort out your priorities then and can introduce you to more options for becoming debt free.

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  2. Did you know that even though you have written a personal check for a payday loan, a lender cannot arrest you for writing a bad check (bouncing a check because of insufficient funds) if you don't have the money in your bank account to cover that check or electronic debit. See http://infoaviator.org/finance/credit/personal-loans/2014/06/08/can-i-go-to-jail-for-a-bad-check-if-i-dont-pay-back-my-payday-loan/ to learn how to give these loan sharks a taste of their own medicine!

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