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A wise guide to…

Getting a payday loan

Payday or emergency loans are a form of flexible finance used to cover you with small cash amounts until your next payday. If you've had an unexpected, short term, emergency expense occur then a payday loan could help cover the costs on the basis you choose your lender very carefully.

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Representative 99.8% APR (fixed). Representative example: If you borrow £500 over 52 weeks at a Representative rate of 99.8% APR and an annual interest rate of 99.8% (fixed), you would pay 52 monthly instalments of £13.41. The total charge for credit will be £197.32 and the total amount payable will be £697.32.
Choose Wisely is a trading style of Choose Wisely Limited and is a free to use price comparison website. Choose Wisely Limited is authorised and regulated by the Financial Conduct Authority as a credit broker not a lender, firm reference number 730574 and is registered with the Information Commissioner’s Office number Z3106681.

A quick, easy way to get a payday loan today.

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Representative 49.7% (variable).

How to get a payday loan in 3 simple steps.

Affordability assessment.

1 form - takes 2 minutes to complete and your data is 100% secure.

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Choose from lenders that have accepted your application.

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If approved, the cash can be in your account in as little as 15 minutes.[†]

Table of contents

Written by Andrew Freelander
Read time: ~5 mins
Published: 23rd January 2017 Updated: 9th September 2020

What are payday loans?

Are you frustrated because your car has just broken down? Maybe your boiler has packed in? You're 3 weeks from payday, your bank balance is low and you've got no idea how to cover the cost of the repairs. The stress these factors cause is affecting the rest of your life. That's where payday loans step in.

Payday loans are a type of personal loans that were designed to provide the convenience of borrowing in an emergency or over short periods. The original purpose was to cover you for one month until your wages are deposited, and some even offered reasonable weekly payments, but many lenders have now changed their service to benefit customers. Allowing them to repay their loans over slightly longer periods of 3 - 6 and even up to a duration of 12 months in some cases.

Where loans are repayable over shorter periods, lenders charge higher fees for borrowing. It's not uncommon to see products with APRs of over 1000% but it's important to remember that APR refers to the annual percentage rates, these products rarely offer borrowing over 12 months so the actual amount repayable will look quite different. Interest is capped at 0.8% interest per day or 100% of the total amount borrowed. Default fees are capped at £15. So, for example If you borrow £200, the maximum you can be charged in interest is £200.

Any customer looking to borrow instant payday loans should carefully consider their options as it’s expensive to borrow. Especially when compared to other types of personal finance like guarantor, secured or unsecured lending. Meaning, it could be easy to run into significant financial difficulties if you're not capable of repaying any money owed to your creditors.

How do payday loans work?

When you apply, you choose the amount you need and provide personal details about your financial situation; income, expenditure and credit history. In addition, some financial products will ask questions about factors like the amount of dependents you have, the balance on any credit cards you own, or how much is left to pay on your mortgage. Essentially your financial status will be assessed.

The lender uses this information to carry out an affordability assessment, once it's processed they will give a detailed decision on approval. It may seem like a lot of information to part with or an intrusion into your life but the lender only wants the information you provide to assess what is happening in your life financially. Once they have calculated the risk for both parties they will communicate their answer directly to you.

If your application is successful, the money is paid directly into your bank account. This can happen fast, with funds available to be accessed via your mobile banking or debit card within 24 hours. Earning these products the title of same day loans. You used to be expected to repay in full, plus interest, along with any charges at the end of the month.

Most payday lenders are changing their rules from receiving payments for the full amount borrowed, plus interest, one month after the loan is issued - to longer periods. The amounts on offer to a consumer differ from product to product but are usually relatively small, between £100 - £1000. This is also why these products are sometimes referred to as high-cost short-term loans.

They carry a wealth warning (that can be seen at the bottom of this page). The Financial Conduct Authority (FCA) regulate payday loans direct lenders and require that people are warned about the problems they could face if they struggle to repay the loan on time. This is due to the risks associated with the high representative APRs online payday loans carry.

What types of payday advance loans exist?

Payday loans often get referred to as other things, like installment loans or cash advance loans for example. This makes it hard to choose the right direct lender which makes it hard to choose the right direct lender because there are many different options with very little difference. Our website covers these options in detail but to simplify things we've curated this list of alternative products that could also be considered a payday loan:

  • Cash advance/Payday advance/ Wage advance/ Salary advance/
  • Same day loans
  • Instant payday loans
  • Emergency loans
  • Bad credit payday loans
  • High cost Short-term loans

They all have these similar terms:

  • £100 - £1000 loan amounts
  • Repaid in installments on your next pay date, within 3 - 12 months of the loan being paid into your bank account
  • APRs typically between 100 - 1500%

How do I get a payday loan with bad credit?

Payday loans companies will consider those with bad credit. Perhaps more so than other high street lenders or traditional UK loans. The reason people with bad credit are applicable is that the lender has already accounted for the risks of not receiving their money back with the high interest rates they charge.

Are online payday loans safe?

For the most part yes. They may be expensive but most payday lenders that appear on the financial services register are perfectly safe. There are of course companies online with a less than glowing reputation. Anyone not authorised to lend money should be avoided. This is why it pays to do your research before entering your personal details into any online application to protect yourself from scams, fraud and more generally not finding the solution to your problem.

It is important to mention the issue reported by the press regarding the situation of traditional payday lending in the UK. As we've mentioned throughout this article a lot of traditional payday lenders have started to review their processes.

The governance surrounding payday lending has become a lot stricter in recent years. Meaning, the FCA has shone a spotlight on payday lending to ensure consumers were being treated fairly. This involved looking at lenders acceptance criteria. The FCA realised they needed to do something when the amount of unpaid, defaulted payday loans increased. In 2013 UK customers borrowed £2.5 billion from payday lenders and in 2016 payday lenders were made to compensate millions in redress to thousands of consumers. This resulted in the closure of some businesses. Where companies failed to meet the conditions the FCA expected they could no longer operate and stopped new lending. The most notable casualty was Wonga loans.

This doesn't mean all online payday loans companies are out to rip you off. After many payday loans cases were reviewed and guidance was offered to payday lenders on more accurately assessing personal circumstances most took it on board and, as we've stated, made the necessary change.

All of the lenders we work with are authorised and can be found on the financial services register. We refuse to work with anyone who fails to comply with FCA regulation and doesn't continually evidence they treat customers fairly through great customer service and being a responsible lender.

What are the risks of taking out a payday loan?

The risks have been well documented in the press, where a less than friendly view has been taken of payday products. There have been many complaints by consumers who have run into financial difficulty as a result of using these products. Workers in the media have quite rightly questioned whether a large portion of the market has protected the rights of their customers or acted in their best interests.

Some customers had been funded loans they clearly couldn't afford, others relentlessly marketed to, to take out further unaffordable loans racking up insurmountable debts and overall, the practice of payday was seriously thrown into contention.

What to consider when making a payday loans decision

Here are the two main risks to remember when assessing any payday lender

  1. On the whole these products are expensive. Can you afford the repayment conditions or can you find an affordable alternative?

  2. The terms can be unmanageable if you enter into an agreement blindly. To be affordable the loan will need to be paid back quickly. Can you make that financial commitment?

The future of payday lending does however look much brighter. The government agencies employed to look out for consumers, such as the FCA and the Information Commissioner's Office have shone a spotlight on payday lending cleaning up the procedure, raising standards, improving transparency and leaving the best of the payday bunch still standing. These are products we feature on Choose Wisely.

When should you take out a payday loan?

There are times when payday products make sense. They're designed to be called upon in emergencies. By emergency, we reference things like the unexpected expense of a car or boiler breakdown, unexpected bills or medical expenses. These things can't be helped but require a quick injection of cash to recover the situation. They usually have an impact on your health, wellbeing or financial security.

Our advice would be not to use them for everyday spending on non-essential items like clothes, shopping, gifts, gambling, or arrears in other finance agreements. If you find yourself in need of money to cover those emergency costs you may be in financial difficulty and should seek advice. A payday loan will not help in those situations and could add another source of expensive debt, which is likely to increase stress, negating the initial benefit.

Which are the best payday loans in UK?

It's difficult for us to suggest which payday products are the best in the UK as some of the best-reviewed products might not fit your individual circumstance. As we've mentioned, your eligibility for a product will differ from lender to lender. That's why we suggest using our Get Accepted application process to get a more accurate response on who will accept your application before you make any decisions.

As an initial point of research here’s the minimum criteria for 3 great payday products:

MyJar

  • You need to be aged 18 or over
  • You will need to have a regular income
  • You must be a UK resident
  • You need to have a UK bank account with an active debit card
  • You will need a mobile phone
  • You must have an email address

Satsuma

  • You must be aged between 18 and 74
  • You need to be a UK resident
  • No bankruptcy
  • You will need an email address
  • You must have a mobile phone
  • You must agree to a credit check

Uncle Buck

  • You must be aged 18 or over
  • You need to be a UK resident
  • You must be employed
  • Your salary must be paid into your bank account
  • You need to have a valid debit card
  • You must have an email address
  • You must have a mobile phone
  • No debt management plans, IVAs or bankruptcy
Product
Lend between
Review
APR
MyJar
£100 - £7,200
788% Representative
Satsuma
£100 - £1,000
1575% Representative
Uncle Buck
£100 - £1,000
1244% Representative

Can I get a payday loan?

To summarise, payday loans are accessible but their advised uses are limited. If you're budgeting effectively and an emergency has cropped up that you haven't accounted for, getting a payday loan could be the answer. Providing you're confident about paying it back quickly to avoid the hassle of dealing with expensive charges.

The best way to figure out what chance you stand of getting a payday loan online is to make an application on Choose Wisely. It's safe and secure and we can tell you which lenders will accept your application before you apply.

Here's the process in 6 simple steps:

  • Select your loan amount and term using the options on this page.
  • Click Get Accepted.
  • Fill out the form as accurately as possible to get accurate results.
  • Compare the cheapest lenders who will accept your application.
  • Complete the application with your chosen lender.
  • Await final decision from the lender.

Payday loans FAQs

Can I get a payday loan if I’m on benefits?

Some payday lenders will accept those receiving benefits providing you can evidence that you have enough expenditure to cover the cost of repaying the loan within the loan duration.

Will I be accepted if I apply through Choose Wisely?

We cannot guarantee the lenders in our panel will accept you without knowing your personal situation. We do have a range of lenders with different products and terms so you should be covered. Making 1 application on Choose Wisely will give you a really clear idea on which lenders in the UK will accept your application, saving you time, energy and frustration.

Will I be credit checked for a payday loan?

As part of your application on Choose Wisely you will be subject to soft credit checks by the lenders in our panel. These do not appear on your credit profile and cannot impact your credit score. Should you continue to finalise your application with a lender, they will likely run a hard credit check before agreeing to lend any money. The good news is the initial soft check on Choose Wisely will allow you to choose a lender who's more likely to accept your application, therefore stopping you from running multiple hard checks by applying with direct lenders before you find the right fit.

Can I repay my loan early?

Yes, technically any loan agreement can be repaid early. It's always worth checking the terms of your agreement as there could be early repayment charges. Most payday lenders don't charge early settlement fees and some such as Uncle Buck may even offer you an interest rebate for early repayment.

Written by
Andrew Freelander
Brand & Content Manager at Choose Wisely

Andrew joined Choose Wisely 5 years ago, originally working in a design capacity to make sure the website was simple to use. Most notably he worked with the Consumer Finance Association to design the comparison table of choice for High-Cost Short Term Finance products.

The quickest way to find the best payday loan for you.

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Important Information.

All of the information in this guide is correct at the time of writing.

Rates shown are quotes based on your personal circumstances, are subject to status and are available to those aged 18 and over. Rates available range from a minimum of 3.9%APR to a maximum of 1575%APR Representative and loan repayment periods range from 3 to 60 months.

[*][†] Once accepted, your loan can be transferred to you in as little as 15 minutes. The time that it takes for the loan to show in your bank account will depend on your lender and your bank.

If you need financial advice you can visit stepchange, speak to citizens advice, call the national debtline or speak to moneyadviceservice.org.uk.

If you've been declined, please refer to your credit report to gain an understanding of why before making further applications.
Your score can be accessed for free via any of the main credit reference agencies such as Credit Karma, Clearscore or Experian.

Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk