A payday loan is a small amount of money lent which is designed to be paid back in full on your next pay date. Read more about what they are, how they work and what to look out for in our ultimate guide.
As a consumer looking for a payday loan, where do you begin? With so many lenders vying for your attention, it can be challenging to decipher what is and isn’t a good deal.
You’re not alone in your pursuit of a payday loan. According to the FCA (Financial Conduct Authority), over 5.4 million payday loans were made in the year to June 2018! We understand how stressful it can be to make ends meet - it’s miles away from payday, and you’ve got emergency bills to pay and mouths to feed. We’re here to help you.
There is a lot of misinformation and bad press surrounding payday loans. That’s why at ThisLender, we are driven to equip you with all the information you need to know before you make an informed decision. Whether you want to understand more about what a payday loan is, or how you can secure the best one for your needs, you’ve come to the right place. We’re here to shower you in all the information you need before comparing UK payday loans.
It's always best to weigh up all your options before diving headfirst into a repayment plan. We’re here to answer your many frequently asked questions about UK payday loans, so let’s jump straight to it.
A payday loan is a type of short-term borrowing, where a small amount of money is lent to the borrower at a high rate of interest. The loan is designed to be paid back in full, plus interest, on your next pay date.
The loan is unsecured and gives you, the consumer, a quick cash injection. Whether it’s to help you bridge the gap between now and payday (self-explanatory!), or you’ve had some unforeseen circumstances - water leak or bill payment; a payday loan can help you plug that financial gap.
You must understand how much you can realistically pay back through a repayment plan. Although you might be tempted to apply for a high credit amount, first consider your repayment options.
We only work with lenders who are authorised and regulated by the Financial Conduct Authority (FCA). This means they comply with strict regulatory rules and adhere to responsible lending practices.
A payday loan works just like any other forms of borrowing. You borrow an amount of money and then pay it back at a later date with interest added on top. But unlike bank loans where the repayments are spread over years, a payday loan is taken over 30 days or less, and is repaid in one lump sum, which is usually the day you get paid.
We have created an easy to use payday loan calculator to help you calculate the cost of the loan.
Before applying, you need to make sure you meet the lender's criteria which can be found on their website. Applications are made online and can include information such as personal details, income and expenditures.
The lender will check and verify your application to make sure the details are correct and that you can afford to pay back the loan. They will also perform a credit check. This decision is made within a matter of minutes, although sometimes they may ask you to send in more documents.
If you are successfully approved, you will be presented with a loan agreement. The lender may offer you less than what you initially applied for. Please review this carefully and make sure you are happy before deciding to accept it or not.
If you accept the offer, you will receive the money directly into your chosen bank account, within 10 minutes² after approval\.
The lender will take payment from your credit or debit card automatically on the agreed repayment date by 'Continuous Payment Authority' (CPA) until the loan is paid in full.
The cost of a payday loan will vary depending on the lender, the amount borrowed and how long you borrow it for. The recent and strict regulatory changes made by the Financial Conduct Authority (FCA) mean that you should never have to pay back more than double what you have borrowed.
In 2015, the FCA confirmed price caps for high-cost short term credit (HCSTC) including payday loans to help better protect customers against spiralling debt. There’s no doubt these new regulations have benefited many customers by keeping fees and interest rates low on their loan. These current regulations are set to be reviewed by the FCA in 2020.
Here’s a round-up of the current FCA regulations:
Interest and fees are now capped at 0.8% per day on the amount borrowed. For example, if you borrow £100 for 30 days and pay back on time, you should expect to pay back a maximum of £124. This works out at 80p per day per £100 borrowed.
This is put in place to help protect customers if they struggle to repay, or don’t pay back on time. These default charges should not exceed £15.
The borrower should never have to pay back more than twice what they have borrowed. For example, if you borrow £100, the maximum in interest and charges will be limited to 100% of the loan amount, in this case, it will not exceed £200. This helps against escalating debts.
The FCA has introduced a limit on how many times you can rollover your loan. You will only be able to rollover your loan twice.
We have created an easy to use calculator below to help you calculate the cost of your payday loan.
You can use our payday loan calculator to work out the full cost of your payday loan before applying. We will show you four repayment examples which shows you the total repayment amount if you repay the loan on time. We will then show you the total repayment amount if you are 30, 60 or 90 days late in repaying your loan.
To get started simply use the sliders below to set the amount you want to borrow and the repayment period.
I want to borrow £200
For 20 days
This calculator is intended for illustration purposes only and exact payment terms should be agreed with a lender before taking out the loan.
Interest on loan
Total amount payable
If you borrowed £200 for 20 days and you paid the loan back on time you would pay back £232.00 which includes the loan interest of £32.00. You would pay £16.00 in interest for every £100 borrowed.
Here are a few things you should consider before applying for a payday loan:
As a broker, we do not charge you any fees to use our loan matching service; this is an entirely free and serves to help you find the right financial product for your needs. If you’re looking for the top UK lenders, you’ve come to the right place.
The terms and conditions for each payday loan product are shared with you before you accept the loan offer; read these carefully and ensure you fully understand them. You will also receive all fees and applicable charges from the lender, so you can calculate whether the loan repayments in full are affordable and realistic.
If you need help managing your money, visit MoneyHelper.
If you have a poor credit history or bad credit, you can still apply for a payday loan or a short term loan. We work closely with a variety of FCA regulated UK lenders who consider applicants with poor credit. Lenders may offer you a loan, but at a higher interest rate than customers with a good credit rating.
At ThisLender, we work with direct lenders in the UK; this means the process of applying for credit is usually straightforward. You can use our application form, and we will match you to a payday loan which suits your personal needs.
If you’re considering whether a payday loan is the right financial option for you, take a moment to read through the pros and cons below.
A payday loan is designed to cover those unexpected one-off expenses and unforeseen bills. As a temporary fix to tide you over until you next get paid, they should only be used to help with essential circumstances such as:
However, they should not be used for long term borrowing or if you have ongoing financial issues. Here are some non-essential scenarios which are not suitable for a payday loan:
Comparing payday loans from different lenders is a great way to make sure you are getting the best deal for your circumstances.
When you compare payday loans take into account the total cost of the loan and if there are any hidden fees or charges.
We have listed out some frequently asked payday loan questions.
Payday loans are typically small loans that usually range between £50 up to £1,000†. First-time customers may only be eligible for smaller amounts, to begin with, while existing or repeat customers may qualify for larger amounts.
Our lenders will ask you about your monthly income and outgoings. These questions will form part of your affordability profile which allows the lender to calculate the maximum loan they are willing to lend you.
To apply for a payday loan, the following eligibility criteria will be required:
A payday loan is borrowed from as little as one day up to 1 month. It’s usually repaid in one lump sum on your next payday date. However, most lenders offer borrowing over a longer period from 3-12 months and allow you to repay the loan in smaller, more manageable monthly instalments.
Funding usually happens within 24hrs, but some of our lenders can provide instant funded loans within 10 minutes² after application approval.
Lenders will use a recurring payment or ‘continuous payment authority’ (CPA) to collect money from you. Similar to a direct debit, this gives them permission to take a payment or payments automatically from your credit or debit card on the agreed dates.
Most of our payday lenders also allow you to pay off your loan early without an early repayment fee. Please contact your lender if you would like to repay your loan early.
Yes. When you apply for a payday loan in the UK, the lender will be required to perform a credit check on you as part of their commitment to responsible lending. This allows them to look at your credit file and financial history to help make sure you are a responsible borrower.
The lender will request your credit score from at least one credit reference agency listed below:
Remember: Credit checks will be recorded on your credit file. So be careful not to apply for credit with multiple lenders as this can negatively impact your credit score.
You can read more about how you can improve your credit score here.
Every payday loan lender will perform a credit check as part of their commitment to responsible lending, and no credit check payday loans don’t exist. Initially, lenders may offer you a loan decision based on a ‘soft credit check’, but they will always perform a ‘full credit check’ before depositing funds to your bank account.
You must be aware that if you do not repay your loan at the agreed date between yourself and your loan provider, this will result in your loan provider reporting your case to the Credit Reference Agencies; which may have a negative effect on your credit score.
This may negatively impact your ability to obtain credit in the future for services such as car finance, mobile phone contracts or satellite TV subscriptions.
APR is the ‘Annual Percentage Rate’. This measures the overall cost of the loan, including the interest rate plus any other additional fees and charges over a whole year.
Like with all types of credit agreements, if you can’t pay, you will often incur additional charges that will be added to your loan. You must be aware that a missing or non-payment could adversely affect your credit report and any attempts of obtaining credit in the future.
If you have already taken out a payday loan and you are struggling, or think there is a possibility that you will not be able to meet repayments, we strongly encourage that you contact the lender as soon as possible as they may be able to arrange a new repayment plan.
Some payday lenders have signed up to a good practice customer charter, and if you're having problems repaying your loan this charter requires them to:
Yes, they are, although not as available as they used to be. We recommend that you look at all alternative financial options before applying for a payday loan. A payday loan can quickly turn into problem debt and can also affect your credit rating if you don’t pay it back on time.
The team at the MoneyHelper have put together a guide to help you find alternatives to payday loans. These alternatives include asking for a pay advance from your employer, borrowing from family members and friends, using a credit card, using an authorised overdraft facility or borrowing from a credit union.
If you are having financial difficulties or need to speak to someone regarding your financial situation before applying for a loan you can get free and confidential advice from MoneyHelper (formerly The Money Advice Service), National Debtline or debt charity StepChange.
Get your free loan quote today
Access from £50 to £5000†APPLY NOW
Representative 49.9% APR
Representative example: Amount of credit: £1200 for 18 months at £90.46 per month. Total amount repayable of £1628.28 Interest: £428.28. Interest rate: 49.9% pa (variable). 49.9% APR Representative. Rates from 45.3% APR to 1721% APR - your no-obligation quote and APR will be based on your personal circumstances. The minimum repayment period for any loan will be 90 days from the date the loan is issued. The maximum repayment period is 3 years.
We are a credit broker, not a lender.
Types of Loans & Credit