If you have a payday loan and are having trouble repaying it, then you may have all sorts of thoughts about what you could do including getting a £500 loan to repay it. It is worth knowing that you cannot get a payday loan from a particular lender if you already have one with them and therefore paying off a payday loan with a £500 loan would mean that you would have to approach a different lender. This should be possible for you though so it is an option that will be available but it is good to think about whether it is a wise decision or not. You need to think about what the consequences will be of not getting the £500 loan and not repaying the payday loan as well as what the consequences of getting the £500 loan will be.
Representative Example: £400 borrowed for 90 days. Total amount repayable is £561.92 in 3 monthly instalments of £187.31. Interest charged is £161.92, interest rate 161.9% (variable). Representative 305.9% APR. We are a broker not a lender. We don't charge fees. We don't sell your personal information.
If you have a payday loan and you cannot repay it then you will be charged a fee. The way that different payday lenders charge varies, but they tend to charge a daily fee as well as interest on the money owed. This can add up to quite a bit, but in the UK there is a cap on how much you can be charged, with charges being limited to the value of the loan. This means that if you have only borrowed a small amount, what you are asked to repay will also be relatively small.
It is worth thinking about whether you might be able to find the money to repay the loan before you next get paid. If you have to wait until your next payday and somehow struggle to pay other bills and buy food and things like that then you could be in real trouble. However, you may have other sources of income that you can use. It might be that you get some benefits, some extra pay from your job or that you can do some freelance work or online work to get some extra money to pay towards it. You could also see if you have anything that you could sell in order to help you to raise some extra money. It may also be possible to get an advance on your salary to give you a bit extra.
If you get a loan to pay off the payday loan then you will avoid the late repayment fees for the payday loan but you will then have another loan to pay for, including the fees for that loan. Therefore it is really important that you calculate how much you will pay for this loan and whether it makes financial sense to take it out or not.
If you do decide to go for the loan then you will need to make sure that you will be able to cope with the repayments. Obviously you have struggled with the payday loan and you need to think about why you were unable to repay it and whether you will get the same problem with this loan or whether you can be confident that you will be able to repay it. Consider whether you might be able to do something different to be able to afford it better. This could include finding ways to earn a bit more money so you have more available to pay it off as well as cutting down spending, if you can so that there is more money left to pay towards the loan and you can manage better for the rest of the month once you have made the loan repayment.
So using a loan to pay off a loan may not be wise, as it could just end up with you borrowing more and more money. However, it could be useful to get you out of trouble and help you to move on from your debt. You will need to work out whether you think that the idea will work well for you or not, depending on your personal situation and the reasons why you were not able to manage the repayment on the payday loan. It is something that you will need to think through though.