Payday Loans and Your IVA, Question by Question
What happens to the interest, the card payments, a guarantor, and more.
Can payday loans be included in an IVA?
Yes. Payday and other short-term loans are unsecured debts, so they can go into an IVA in the same way as credit cards, catalogues and personal loans. Once the arrangement is approved they are frozen, the lender is bound by it, and any qualifying balance left at the end is written off. For many people, payday loans are exactly the kind of debt an IVA is designed to deal with.
What happens to the high interest and charges?
They stop. Payday loans are known for very high interest and fees that can quickly spiral, but once your IVA is approved, all interest and charges on the included loans are frozen. From that point the amount you owe no longer grows, and your fixed monthly payment goes towards clearing it. For many people this is the single biggest relief an IVA brings.
Can I include several payday loans at once?
Yes, and it is very common. People often end up with several payday loans at the same time, sometimes taken out to cover each other, and all of them can be included in one IVA. In fact, you must include every qualifying debt, so you cannot leave one payday loan out to keep using it. Bringing them all together into a single affordable payment is often the whole point.
Will the lender keep taking money from my card?
Not once you act on it. Payday lenders often collect through a 'continuous payment authority' on your debit card, which can keep taking money even when you cannot spare it. You can cancel a continuous payment authority by telling your bank, and you should do so. Once the IVA is approved the lender is bound and must stop, but cancelling the authority protects you in the meantime.
How much of a payday loan is written off?
The same way as your other unsecured debts. A payday loan is not treated as special, it sits alongside your other creditors, you pay what you can afford over the term, and whatever qualifying balance remains at the end is written off. How much that is depends on your overall affordability across all your debts, not on the payday loan on its own.
What if my payday loan has a guarantor?
This is important. Some short-term loans are guarantor loans, where someone else agreed to pay if you could not. Including your own debt in an IVA does not release the guarantor, so the lender can still pursue them for the balance. If a friend or family member guaranteed a loan, it is worth understanding this, and talking to them, before you proceed.
Can I take a new payday loan during the IVA?
No. Taking on new credit, including payday loans, is not allowed during an IVA without permission, and a new loan would not be covered by the arrangement anyway. It can also breach your terms and put the IVA at risk. If you find yourself tempted to borrow because money is too tight, that is a sign to speak to your supervisor about reviewing your budget, not to take another loan.
Could I claim money back for unaffordable lending?
Possibly. Payday lending is regulated, and if a loan was given to you without proper affordability checks, you may be able to complain and reclaim interest and charges. Any refund usually has to be paid into your IVA for the benefit of your creditors, rather than kept, but it can still reduce what you owe overall. A free adviser can help you understand whether you have grounds to complain.
Should I get advice?
Yes. A spiral of payday loans is often a sign of deeper money pressure, and an IVA is only one of several ways to deal with it. A free, impartial adviser can look at your whole situation and tell you honestly whether an IVA, a Debt Relief Order, a Debt Management Plan or another route would serve you best. It costs nothing, and there is no obligation.
