What is a payday loan?
A payday or short-term loan is a loan repaid over less than 12 months at a Representative APR over 99.9%.
When should I consider a payday loan?
Payday loans are designed to help with an unexpected emergency, like the car breaking down or the boiler packing up. They’re not suitable for everyday bills and longer term borrowing.
Payday loans are an expensive way to borrow and will impact your credit file so even in an emergency payday loans should be considered a last resort.
Here are some alternative ways to get cash quickly.
Can I get a payday loan?
Each lender has different acceptance criteria. The Choose Wisely eligibility checker takes less than 2 minutes to complete and will show which lenders you’re most eligible for.
The pros and cons of payday loans
Before you dive in for an application here’s a quick overview:
- Bad credit considered
- Small amounts available over a shorter term
- Fast payout
- High potential charges
- High interest
- Not suitable for long term borrowing
- Not suitable if you're in financial difficulty
How much will a payday loan cost me?
It will change from lender to lender but the maximum they can charge is capped by the FCA:
An initial cap at 0.8% per day - interest and fees can’t be more than 0.8% per day of what you borrowed.
A £15 cap on default fees - if you default you can be charged £15 in fees but you still may have to pay interest.
A total cap of 100% - eg. If you borrow £100 the maximum you’ll ever repay is £200
Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk.
How to get the right loan
The Choose Wisely loan search will show you which lenders have provisionally accepted you before you apply. This removes the guesswork and gives you the power to choose the best loan for you.
Mark joined Choose Wisely in 2015. He continues to work in close contact with the providers, brokers and journalists operating in the world of consumer credit.