Caught In the Payday Loan Cycle

Don’t stress the debt!

Caught up in a Payday Loan Cycle? Struggling to meet your monthly bills on time?

You may think of taking out a payday loan to cover your expenses. But what if you can’t afford to repay the loan by the deadline?

Many people reach for payday loans to clear outstanding loan repayments, only to find themselves stuck in a never-ending loan cycle.

As the additional loans pile up, they are burdened with more fees and find it a challenge to better manage their finances. Sound familiar?

When you don’t see a way out of this loop, it can become stressful. But keep in mind that simply worrying about your debts won’t take you anywhere.

You should rather develop a plan to effectively manage debts which is why we’ve taken the time to write 5 helpful tips to help you get back on track.

5 steps to help you take control of your finances:

  1. Keep Track of Loans

Writing down a list of all your loans is a good place to start. This will make it easier to decide which option will work best for you to return the loans and help you better understand your overall debt level.

This is easily achievable on an excel spreadsheet, like the example below;

Payday loan debt example

It’s important to remember that obtaining another loan may not be the best solution, so make sure you stop the borrowing cycles. Once the cycle breaks, you can gradually return the amount to creditors.

  1. Prioritise Loans

Assigning priorities to loans can give you a clear idea on which loans should be paid first. Below is a list of examples of priority debts that you should consider;

  • Court fines (CCJs).
  • Council Tax.
  • TV Licence.
  • Child maintenance.
  • Gas and electricity bills.
  • Income Tax, National Insurance and VAT.
  • Mortgage, rent and any loans secured against your home.


Failure to pay any of the above in a timely manner can lead to more serious action being taken against you such as a CCJ or even more severe, repossession action.


It’s important to contact your creditors to discuss repayment options, instead of simply ignoring them.


  1. Understand what is affordable

In your quest for a debt-free life, you may want to clear off the debt as soon as you get paid. But if you spend your entire month’s salary on paying off loans, how would you get by until you receive the next salary?

An effective way to manage repayments, is to understand your household income and expenditure. Expenditure is the amount of money you have left once you have paid for all of your bills and necessities such as travel or food costs.

Understanding your expenditure will you give you a clear idea if there’s any costs that you can cut down on whilst you’re trying to become debt free.

Remember to include any of the priority bills such as CCJs, but do not include in this list your debts. This will give you your disposable income, which is the money you have left over to pay your debts.

Again this achievable on excel as per the below example;

payday loan cycle

Please see the following useful link to help you understand what’s a reasonable amount of money to include for items such as food etc;


  1. Contact your creditors

Now that you have a clear idea of your financial situation, the next step is to get in touch with your creditors.

You can’t decide to reduce the repayment amount on your own but all financial companies will be able to offer repayment options to help people experiencing financial trouble.

Knowing your debt level and your disposable income, will make it easier for the creditors to understand your situation and how much you can afford to repay – so contact them prepared.

While payday loan providers aren’t obliged to do so, it’s possible that they may agree to freeze interest on your account to help you repay your outstanding balance.


  1. Debt Management Plans (DMP)

If you don’t want to contact creditors yourself, you can always opt for a debt management plan where a company will deal with this for you.

In the first 6 months of 2018, Step Change announced that they had 326,897 new clients on debt management plans. It’s important to know that you are not alone in this situation.

A DMP works best for people with a lower amount of debt, but you can opt for it even if you owe creditors a lot of money.

If you have at least 2 lines of credit and you owe more than £1,000 in debt, you can go for this option.

It’s important to note that the DMP negatively affects your credit history. Your credit file highlights when you received default notices or if you have paid less than the monthly agree repayments due to financial hardships.

But it doesn’t mean that you should take out more payday loans and further damage your credit score.

There are plenty of free charging debt management services available, we have listed a few below;

Warning: Late repayment of payday loans can cause you serious money problems. For help, go to