Warning: Late repayment can cause you serious money problems. For help, go to moneyhelper.org.uk.
Please note: High-cost short-term credit is unsuitable for sustained borrowing over long periods and would be expensive as a means of longer-term borrowing.
We can’t always predict what’s around the corner, and sometimes unexpected costs like a broken-down car can leave us short until payday. If you’ve found yourself in this kind of situation and need to borrow money, a short term loan is one way to bridge the gap. Unfortunately, while these loans are fast and convenient, they’re also extremely expensive.
A number of specialist lenders (such as those listed above) offer fast, easy but very expensive loans online. Companies like Wonga, with fairly relaxed eligibility criteria, made their names offering this service to people who might struggle to get credit elsewhere.
The loans involve relatively small sums – from as little as £50 up to around £500 – but if it’s your first time using a new lender, then it’s likely to want to start small.
Applying for and receiving your loan can take as little as a few minutes – it’s scarily convenient. When you apply or a one month loan, the lender will run affordability and credit checks to make a decision on whether or not to formally offer you the loan. The lenders aren’t expecting perfect credit histories by any means – but they must be careful to only lend responsibly. In other words, they’ll need to be sure that your regular income and outgoings would make the repayment manageable. You may find that the lender is willing to lend to you, but is only willing to lend a smaller sum than you’d initially hoped for.
In most cases, you’ll make a single repayment at the end of the month – on or just after your payday, using something called a “continuous payment authority” (in other words you won’t need to log-in and make a payment – the funds will be automatically transferred from your account on a pre-agreed date). You’ll pay back the original sum you borrowed, plus a hefty chunk of interest on top.
High cost short term credit is regulated by the Financial Conduct Authority (FCA), which states that borrowers should never be charged more than 0.8% interest each day. Unfortunately, most lenders have opted to set their rates right on, or fractionally under, this limit.
That means that if you were to borrow £100 for 30 days, then provided you used a legitimate, authorised lender and you paid the loan back on time, you would pay a maximum of £24 in interest. £200 borrowed over 30 days would cost a maximum of £48 in interest, and so on.
You can use the one month loan calculator above to get estimates of the overall cost.
Most lenders in this space aren’t looking for flawless credit records, but you will need to meet the following criteria:
You more than likely do. In fact we’ve written an article looking at payday loan alternatives.
First off, you should only use payday loans as a last resort – don’t take out a payday loan if it’s not for a truly essential expense.
Borrowing from friends or family can be awkward but it’s invariably a cheaper option.
If the expense is big, one-off bill, then you might also be able to come to an arrangement with the company billing you – it’s often worth a quick call to the customer service department to see if a payment plan would be an option.
An authorised overdraft will usually work out cheaper – so you could contact your bank and ask them for this facility (or if you already have the facility, you could ask for a limit increase). You do have to be careful with overdrafts however – they often involve fairly high interest rates and because there’s no deadline involved, if you end up paying off your borrowing over several months, the costs could soon spiral.
Check out our full list of alternatives or visit the MoneyHelper to learn more.
1 month loans can be effective if you’re hit with some unexpected costs. Though these loans are fast and convenient, they often come with very high interest rates. Make sure you exhaust your full options before turning to this kind of short-term, high-cost loan.
Credio was a popular source of short-term credit online until the lender stopped issuing loans in 2018.
Compare the max amounts, turnaround times and serviced states of top online payday loans to find the best one for you. Plus learn what to watch out for.
If you know you want a loan like the payday loans offered at Fair Finance then check out our list of alternative lenders. Compare lenders and apply online today.
Looking for loans like Cashasap? Check out our list of UK lenders offering similar payday loans and services to Cashasap.
Creditstar isn’t the only short-term loan provider around. Check out our list of popular providers that offer similar products and services to Creditstar.
Had a payday/short-term loan application declined? Wondering why? We take you through the top reasons payday lenders say “no” plus what to do next.
If you’re experiencing a financial shortfall, you might be considering a six-month loan. Use our guide to compare loan rates and overall costs from a range of lenders, and to learn more about how short-term loans work.
Looking for sites offering similar loans to Cashfloat’s? Browse popular short-term lenders offering a comparable service. Compare rates, fees, eligibility and estimate the total cost of borrowing.
Experiencing unexpected costs and considering a £1,000 short-term loan? Use our in-depth guide to compare rates between lenders and to get a fast and simple estimate of costs.
Sometimes unexpected costs pop up and leave us temporarily short of cash. If you need a helping hand for three months then you might be considering a short-term/payday loan. Use our guide to compare rates and total costs of borrowing from a range of UK lenders and to find out more about how short-term loans work.