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If Wonga goes bust, what happens to my loan?

When you hear the phrase ‘payday loan’, it’s a fair bet that one of the first words that come to mind is Wonga. But what do their recent difficulties leave any deals you have with them?


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When you hear the phrase ‘payday loan’, it’s a fair bet that one of the first words that come to mind is Wonga.

Wonga was undoubtedly the most recognisable lender offering these short-term loans, to the point that its name essentially became shorthand for this form of high-interest form of borrowing.

But while Wonga initially enjoyed significant success in offering loans with enormous rates of interest to borrowers who were having a few financial issues, recent years have seen Wonga suffer money problems of its own.

This resulted in the firm entering administration on 30th August, having ceased all new lending. Essentially, this is the end for Wonga.

So if you’re a Wonga customer, with an existing loan, what does the firm’s troubles mean for your debt?

Your loan won’t be written off...

The first point here is that if Wonga does disappear entirely, your debt doesn’t. It will still need to be repaid. In fact, your repayments will continue exactly as before until the loan is cleared in its entirety.

While Wonga itself is no longer a going concern, the administration firm - in this case Grant Thornton - are in charge of managing its affairs. That means continuing to collect repayments, so that they can repay some of Wonga’s own debts. So from your perspective the only difference is that the administrators will be handling what happens with the money you repay, rather than Wonga itself.

The Financial Conduct Authority, which is the financial regulator, had this to say to Wonga borrowers when it was announced that the lender was entering administration: “Customers should continue to make any outstanding payments in the normal way. All existing agreements remain in place and will not be affected by the administration.”

In other words, carry on as before.

...but it might be sold on

One of the options open to the administrators, as they try to raise funds to pay off Wonga’s debts, would be to sell your loan onto another firm.

If this happened, rather than Wonga’s administrators, your repayments would go towards this new lender.

The good news here is that if this happens, the new firm will have to follow the same rules surrounding your loan that were set out when you took it out.

This means they can’t change the terms and increase the interest rate you are paying or demand that you pay it back earlier.

You will have exactly the same legal rights as when you initially borrowed the money, even if some other business takes over your debt.

Can I still claim compensation?

One of the reasons for Wonga’s troubles has been a surge in claims for compensation from previous borrowers.

An investigation by the FCA back in 2014 found that Wonga had not been responsible in its lending practices, failing to perform adequate checks on those looking for a loan to ensure they’d actually be able to repay that debt.

The regulator forced Wonga to offer interest waivers to some of these borrowers, or erase the debt entirely. The firm said that it had written off debts belonging to more than 300,000 borrowers, worth a massive £220m.

However, many more borrowers who took out payday loans with Wonga before 2014 have come forward to claim that they were mistreated and demand compensation.

This has partly been down to claims management firms - which promise to make the appeal for compensation on your behalf, in exchange for a cut in any payouts - seeing payday loans as its next big earner now that there is an end date in sight for claims over mis-sold PPI.

You can still make a claim for compensation - you’ll be added to the list of creditors to which Wonga owes cash. However, given the firm’s troubles, you’ll be someway down the list, which could damage the chances of you actually ever receiving a payout.


Hannah is currently studying for a Master's in Comparative Cultural Analysis. She knows all about personal finance, but as a student, she's an expert in money saving tips and tricks.