While Wonga has apparently agreed to wipe the debts of over 300,000 pay day loan clients, that doesn`t mean that all payday loan customers can expect similar treatment, meaning that alternative methods of dealing with ongoing cashflow issues may be required. This could include lifestyle sacrifices, using saving or refinancing creditor debts with a personal unsecured or even secured loan.
The lender has come to an agreement with the Financial Conduct Authority (FCA) to waive £220 million of repayments owed after it conceded that it shouldn`t have lent to those people anyway, as they don`t meet the new lending guidelines.
Of those to benefit, some 330,000 who are over 30 days in arrears will see their debts wiped entirely, while an additional 45,000 who are only late by up to 29 days will just have to pay be what they borrowed, without and interest or charges. They`ll also have up to four months to return the money.
However, this just represents a drop in the ocean of the payday loan market and while some other firms may feel the need to follow suit in order to escape the wrath of the FCA, there are no guarantees, so if you`re struggling to pay back what you owe in terms of your credit generally, it is unlikely all your debts will just get written off.
If your loans, credit cards and other debts are getting on top of you and you cannot find other ways to bring them under control you could aim to take control of your debt by using a loan to settle the outstanding balances. Depending on the amount you need and whether you are a homeowner or not you may want to loom into personal loans, secured loans or even a remortgage, as a way to pay off your creditors and leave you with a single, lower more manageable amount to repay each month. Please bear in mind as this loan would probably be payable over a longer period, it could incur much more in interest payments and secured loans carry the same risks as mortgages.
Find out about how our dedicated loan and finance team will can help you obtain a free, no obligation unsecured or secured personal loan quote by visiting firstchoicefinance.co.uk or call us, from a landline, it`s 0800 298 3000 and from a mobile, it`s 0333 003 1505.
Just before Wonga`s announcement, a poll by Citizens Advice found that the industry could do more to help people who were struggling to pay off what they owed, with only one in five out of the sample questioned indicating that their lender froze their interest when they were in difficulty.
A similar amount of payday loan customers across the market suggested that they hadn`t been fully informed about the financial risks of extending their loan, while just a quarter thought that their lender had offered them a sympathetic ear when their finances were getting too much for them.
Remarking on the findings, Gillian Guy from Citizens Advice notes that `while things are moving in the right direction, some payday lenders are still falling far short of responsible lending [and] customers need to have the full facts at their fingertips when making decisions about borrowing`.
One element that isn`t currently known is how the debt write off from Wonga will affect its customers` credit ratings. As it stands, Call Credit (one of the three credit reference agencies, alongside Equifax and Experian) has called the current situation `complicated`.
Taking out a refinancing personal or secured loan and regaining control of your finances will not only pay off what you owe, but if you have been missing payments on your credit previously but keep up your repayments on your new loan it may well help to strengthen your credit profile and associated score as you successfully make your repayments.
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