Can You Repay a Payday Loan on Behalf of Someone Else?

Yes, you can repay a payday loan on behalf of someone else. If an individual is struggling to repay their loan due to unforeseen circumstances, it is common for a parent, friend or spouse to step in and pay the full balance. This helps the individual clear the debt and avoid any further interest accruing or the stress of receiving any further action.

Lenders are willing to accept repayments from other close relatives or friends as long as it is consensual. As a business, the lender wants to receive the full repayment and avoid costs of chasing debt and if this means receiving payment from a parent or similar, they are happy to do so online or over the phone. 

Why Might You Repay a Payday Loan on Behalf of Someone?

Unforeseen circumstances – Staying on top of loan repayments and debts can be hard for individuals if they face a personal, health or family emergency. It is common to fall behind on payments and having a payday lender chase you for an unpaid debt might be the last thing you need right now.

Avoid interest accruing – When a payday loan is overdue, it incurs a late fee (maximum of £15) and continues to accrue interest for every day that it is left outstanding, making the loan more expensive. Paying off the loan sooner limits the overall outstanding cost of the loan.

Avoid damage to credit score – When a payday loan falls into arrears, the information is sent to the UK’s credit reference agencies and it causes the borrower’s credit score to fall. This makes it harder to access affordable finance, similar loans and credit in the future – or makes it far more expensive. Paying off a payday loan sooner can help keep the individual’s credit score intact. 

Avoid legal action – Whilst unpaid payday loans rarely go to court, a lender will typically send legal letters if they are trying to recover on unpaid debt and this could end up with a County Court Judgement, known as a CCJ. This mark on your credit score can limit your ability to be approved for loans (see CCJ loans) and credit for up to 6 years and it is better to avoid this scenario.

Reduce stress – Falling behind on payday loan repayments can be stressful, especially if the borrower was under financial strain when they first took out the loan. With other bills mounting on the kitchen table, having a lender chase you for payment through calls and letters is only going to add to the stress – and having a relative step in can be welcomed.

What Do You Need To Check Before Paying a Payday Loan on Someone’s Behalf?

Consent Might Be Required 

A lender will typically need consent either verbally or in writing from another person, such as a parent, to make a full payment on your behalf. 

Taking someone’s card details or bank account details to make a payment for yourself is illegal if it is without consent. 

The lender may ask for written consent or require you and the payer to confirm some details over the phone before they take the payment.

Check The Payment Method – Online or By Phone

Some lenders have an account login where you can make repayments and another party can make repayments too. Some loan providers may only be able to take a payment over the phone and some may accept cheques or payment in-person.

Check For Third Party Payments

Some payday lenders may only accept payments from the account of the borrower, so you may need to confirm if they will allow payments from third parties at all.

See Terms in The Loan Agreement

In the loan agreement that you sign before your loan is approved and funded, it is important to see if there are any terms relating to payments from third parties. There may be certain clauses or restrictions or no mention at all. You can always contact the lender directly and ask what their policy is if the information is not clearly stated.

Avoid Disputes and Conflict

On a personal note, if someone is going to repay a loan on your behalf such as a spouse, parent or relative, it is important to understand the responsibilities and implications. 

For starters, the individual may want to know just how much of the outstanding balance has been paid and that there are no further payments due or surprises. 

Usually, this is a close relative helping out another during a financial shortfall, but if the payer is expecting to be paid back, there should be a clear understanding and conversation to avoid further conflict and disputes amongst family.

It is common to have small, yet simple contracts or agreements in place between family members or close friends, whereby they can expect full repayment. 

It is easy to fall out over small amounts of money and taking extra steps and precautions can be necessary. 

Can Another Person Make a Partial Payment For My Payday Loan?

Yes, this is another option that can be discussed with your lender. You may find that you can only afford half of the outstanding balance and your spouse would like to cover the other half. Assuming that the loan is repaid in full and the other individual consents to this, making a partial payment is something that can be accommodated.