What the Wonga announcement means for you

Payday lender Wonga has gone into administration. But what does this mean for you if you are an existing customer, claiming compensation, or were thinking about taking out a payday loan?

Can I still get a loan from Wonga?

No. As of Thursday 30 August 2018, Wonga will no longer be accepting new loan applications.

You can still use Wonga services to manage your existing loans.

Find out more about the alternatives to payday loans.

I already have a Wonga loan, do I still need to repay it?

Yes. Wonga is planning on going into administration but you will still need to repay the loan. You should get some communication from Wonga or the administrators in the following weeks.

Keep to your regular payment schedule.

If you miss any repayments you could be hit by fees and additional charges.

Missing repayments could also harm your credit rating because lenders look at how you’ve managed your existing credit when working out whether or not to lend you money.

I’m claiming compensation from Wonga. What will happen now?

As Wonga has gone into administration, if your claim has been successful but you’ve not been paid you will join the list of creditors.

Once the business has been wound up, the administrators will then distribute any assets that are left. There is a strict order for who gets paid first. This could mean you might not receive any settlement you were granted.

I was thinking of making a compensation claim because I was mis-sold a loan by Wonga. Can I still do so?

Once the administrators have been appointed, the Financial Ombudsman Service (FOS) will urgently clarify the impact on compensation cases brought since the announcement was made.

You are not entitled to claim against the Financial Services Compensation Scheme (FSCS) because loans aren’t covered under the FSCS scheme.

I’m struggling to pay back my Wonga loan. What help can I get?

You are still liable for repaying the loan, so if you are struggling it is important you get free debt advice to help you get back on track with your money. Our debt advice partners offer impartial and confidential advice face-to face, online or by phone. They will be happy to talk with you, however big or small your problem.

Alternative ways to pay for purchases

Payday loans can be a very expensive way to pay for things and it’s worth looking at the alternatives if you need to find extra cash.

Cut back or save up

If you don’t need money urgently, then see if you can save up first. It might take a while, but it will cost you less than borrowing from a payday lender.

See if there is any way you can cut back on other household expenses to find the money you need.

Use our quick cash finder to help you.
Use our Budget planner to see where you can make long-term savings.
Use our savings calculator to work out a plan.

Authorised overdraft

If you need to replace something urgently, you might be able to use an authorised overdraft, but make sure it’s authorised, or included in your interest-free overdraft limit. You will have to pay significant fees if you go into an unauthorised overdraft.

Using other forms of credit

If saving up for a purchase is not an option, there are several ways to borrow money at a lower interest rate than payday loans.

But before you make a decision make sure you know:

  • exactly how much it will cost
  • whether you can afford the repayments.

Personal loans

Personal loans can offer good rates of interest, depending on your credit score. However, you might end up borrowing more than you need as most lenders will not offer loans of less than £1,000, which might be more than the amount you need for a household purchase.

Check out our guide on personal loans.

Credit cards

Credit cards are another option, but you need to be sure you can make more than the minimum repayment each month. If you can’t afford to make significant repayments, borrowing on a credit card can be very expensive.

Credit unions

Loans from credit unions are much cheaper than from other lenders and you can pay the money back at a rate you can afford.

Find out more about borrowing from credit unions.

Responsible Finance

If you’ve been turned down for credit by high street lenders, then you can look at fair finance providers. Their interest rates are lower than high cost credit providers, but higher than a credit union. Repayments are based on an affordability assessment which ensures the borrower can keep up with the repayments.

Find a fair finance provider in your area on the Responsible Finance website.

Pawnbrokers

Pawnbrokers are another option where you leave something valuable, such as jewellery, as security for a loan. The rate of interest you will be charged is normally lower than a high street bank and it’s unlikely you will get the full value of the item, but you will get a quick decision.

Borrowing from friends and family

Borrowing from friends or family might be an option which helps you avoid the risks of high-cost borrowing. Make sure you and the person you’re borrowing from:

  • work out an affordable repayment plan
  • discuss what will happen if you’re late or cannot afford to repayments
  • put your agreement in writing.

If you’re claiming benefits

If you’re on certain income-related benefits, including:

  • Income Support
  • income-related Employment and Support Allowance
  • income-based Jobseeker’s Allowance
  • Pension Credit
  • Universal Credit

you might be able to apply for a Budgeting Loan (or Budgeting Advance if you’re on Universal Credit) to cover the cost of:

  • furniture
  • baby items (such as cot or pram)
  • household appliances (such as cooker or fridge)
  • clothing or footwear
  • work clothes or tools
  • travelling expenses
  • childcare costs to cover training courses.
Discover more about Budgeting Loans and Advances.

Local welfare assistance

If you’re struggling to pay for an essential household item like a cooker, fridge or washing machine and you are getting certain benefits you might be able to find one through your local council’s welfare assistance scheme.

Some local authorities might also give loans to help you buy what you need:

How to avoid high cost credit

Payday loans and other forms of credit can work out to be very expensive and you need to think very carefully before you decide to borrow in this way. Before you make a decision read our guides.

Avoid loan sharks

Loan sharks are illegal lenders who often target people who are desperate and who can’t get mainstream credit. They might seem friendly at first but borrowing from them is never a good idea – even if you feel you have no other options.

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