IVA advice firms categorise debts in another way. Some debts are more important and are identified as being priority debts. Other debts should, theoretically, only be repaid once priority debts have already been dealt with. A mortgage or rent payment is clearly a top priority debt in the eyes of anybody that provides IVA advice. Non-payment of housing costs can lead to homelessness, a generally avoidable outcome. Payday advances (like a payday loan, charge cards, store cards, or even a normal bank loan) are non-priority debts. Needless to say you should pay them if you’re able to afford to, but only once you’ve covered essentials much like your mortgage or rent.
The knowledge of IVA advice professionals doesn’t extend as widely as may be hoped. Individuals who are facing mounting debt problems often don’t find it easy to break down a financial problem methodically as described. That’s not surprising when you consider the huge potential costs (in interest and costs) associated with not repaying an online payday loan. It’s also not surprising if the means for direct number of the money owed is granted for the payday lender at the point of borrowing.
The end result is that even when people may not afford to, a payday loan is often fully repaid. Frequently this leaves those with insufficient funds to spend their mortgages or rent so, when they can, they must find the money somewhere. What’s the most effective way to get the money? Applying for a payday loan seems to have fitted the bill for a million people round the UK in the past year.
This sort of borrowing is totally unsustainable mainly because it results in a repaid build-up of debts that eventually will have to be dealt with. This is the point at which IVA advice providers, debt settlement companies and debt charities are contacted by an individual who has come to the realisation they cannot cope financially any more.