Payday Loans - guidance from Debt Camel

A survey last year found that “26,400 undergraduates and 5,400 postgraduates depend on payday lenders and could be paying annual interest rates of up to 1,500%” – so if you are a student who has fallen into the payday loan trap, you are not alone! Payday loan companies make their profits from people with money problems and students are an obvious target for them. At least one lender has students as its main market.

You may have seen that some lenders such as Wonga were made to write off loans that had been defaulted on. But even if you repaid your loans on time, you may be able to get a refund if your loan was “unaffordable” by making a complaint to the lender first, and then going to the Financial Ombudsman if the lender rejects your complaint.

A loan is “unaffordable” if you couldn’t repay it on time and still have enough money left to pay your rents, bills, and everyday living costs such as transport and food. For students, this means looking at what your expenses would be before your next student loan or grant payments arrive. If you repaid £300 at the start of October it may have felt easy, but as a result you didn’t have enough to live on and had to borrow again before the next term started – in this case the loan you repaid in October wasn’t “affordable”.

The Ombudsman is often looking at cases where people have borrowed on a regular basis and deciding perhaps the first loan was OK because the lender couldn’t have realised the borrower had problems. But students have a pretty low income, and so any indication of repeat borrowing should have made the lender stop and think whether they should lend to you again… but all too often they didn’t, just handing out more loans.

There are some template letters for making an affordability complaint on my website at Can you get a payday loan refund? You will need to change these to tell your story, for example mentioning when you get your grant money and what your expenses are until the next instalment.

Where a complaint succeeds, the lender is normally told to refund all the interest and charges that were added, plus 8% interest. And also delete the loans from your credit record, as they should never have been made.

This is a guest post by Sara Williams, a CAB advisor who blogs about debt at Debt Camel. 

Note from Levitate Student - thanks to Sara for this excellent post. Some students face challenges trying budget on student finance much of which is  paid quarterly, and this can lead to pressure to find funds in the short term. High cost credit is unlikely to be the right solution and could lead to long term problems. Always seek advice from your institution money advisers or other trusted money advisers about income maximisation and debt issues. See Know Where to Look page.