You should always refer to your loan agreement for exact repayment amounts as they may vary from our results. High-cost short-term credit is unsuitable for sustained borrowing over long periods and would be expensive as a means of longer-term borrowing. The maximum APR of the loans we compare is 1,721.0%.
We compare payday/short-term loans from
How do payday/short term loans work?
These are straightforward, easy-to-access, fast but expensive loans for relatively small amounts, where the sum borrowed accrues daily interest of up to a maximum of 0.8% – that’s 80p per £100 borrowed. Borrowers will usually make monthly or weekly repayments which consist of the interest accrued so far plus a chunk of the outstanding capital.
Payday loans, along with other short term (a year or less), unsecured personal loans where the APR (annual percentage rate) is 100% or higher are classed as “high-cost short-term credit” by the Financial Conduct Authority (FCA), which regulates the market.
Under the FCA’s rules, lenders can’t charge more than 0.8% interest daily and the total cost of repaying the loan can’t exceed the original amount borrowed – so if you borrow £100, the most you’ll ever have to pay back is £200. Any fixed fees (for example a fee for missing a payment) are capped at £15.
You generally won’t see high-street banks providing these loans. A number of new, predominantly online companies like Wonga and QuickQuid found success in the early 2000s offering payday loans over the Internet.
Payday and short term loans are much easier to get approved for than a longer-term personal loan from a high-street bank, because you don’t need to have good credit. However, they’re an expensive method of borrowing, so you should explore other options before you take one out and only use them for essential one-off expenditures. With the costs involved, they’re not a good idea for borrowing over longer periods or for sustained borrowing.
How do I repay the loan?
Generally lenders will schedule the payments for on or just after your payday. Some offer the flexibility to make payments weekly or fortnightly, if that’s how you receive your income.
In most cases, payday loans and other short term instalment loans are repaid using a continuous payment authority (CPA). That means funds will be automatically taken from your account on the scheduled day(s).
Some lenders accept payments by other means such as direct debit or a manual transfer.
Although the lenders don’t charge a fee to set up the loans, fees of up to £15 can be incurred if you don’t make payments on time. Late payments will also damage your credit rating and therefore your ability to borrow in the future. You should only consider a payday or short term loan if you’re certain you’re going to be able to meet the repayment schedule.
What is a Continuous Payment Authority (CPA)?
A CPA is a payment arrangement in which you give a company permission to withdraw money from your account on a reoccurring basis. CPAs differ from direct debits because they give the company being paid the ability to withdraw money from your account whenever they wish, and to take payments of different amounts without consulting you. Most payday loan companies will use CPAs to collect your repayments, though you can cancel this at any time by consulting with either your lender or your bank. If you do cancel a CPA, make sure you arrange to make repayments by another means. If you miss a repayment it will affect your credit score and potentially cost you extra in fees and additional interest.
How should I compare payday loans or short term loans?
When you’re in urgent need of money, even a bad deal can look good. Be sure to compare lenders to get a loan with the best rates that fits your needs. Here are some things to consider:
Total payable. Probably the single most important factor to consider, this is the total amount the loan will cost you (provided you don’t miss any repayments). It consists of the original amount borrowed plus the interest. Different lenders structure their loans in different ways, so the total payable helps consumers to easily work out which lender would be cheapest. Focusing on the interest rate alone can be misleading, because lenders can structure repayments in different ways (for example loans where you only pay off the interest, until the final payment when you pay the interest plus the original sum borrowed). It can also be tempting to borrow over a longer time frame to access a lower rate, in turn pushing up the overall cost.
Eligibility. To be eligible for a short term loan you must be a UK resident, at least 18 years old and have a current account. While most lenders won’t reject you simply based on your credit score, they will normally require you to be employed and have a steady income. Some direct lenders specify what your minimum income must be, so it’s a good idea to check before you apply.
Flexibility. Most lenders don’t charge fees for repaying a loan early and will only charge you interest for the days on which you borrowed. If you’re planning to make overpayments where possible and to clear your loan ahead of time, check the lender’s policy on early repayments to make sure you’ll save money by doing so. Additionally some lenders allow you to “top up” your loan if you need to, although this will obviously affect the overall cost.
Fees. Generally payday lenders don’t charge any upfront fees such as “product” or “application” fees (although it’s still smart to make sure), but some will charge up to £15 for a late repayment. There are plenty of other good reasons not to miss a payment – not least the damage to your credit score.
Discounts. Some short term lenders now offer promotional codes which let borrowers save money on their loan. You may wish to browse our Satsuma and Sunny discount code pages before applying with these lenders, for example.
What is APR?
The annual percentage rate (APR) is a measure designed to help consumers compare loans from different providers. However, APR alone should not be used to decide on a payday or short term loan – it is important to consider other factors such as the total amount repayable.
All payday or short term loan providers must calculate the APR of their products and services using the same calculation. It’s calculated based on a one-year term (even if the loan is only for one month) which can make already-high rates seem even higher. It also takes into consideration both the interest and charges.
With new payday loan companies emerging all the time, these pointers can help you find legit short term loans easily:
It has FCA authorisation. If the broker or direct lender you’re borrowing from is legitimate it should be in the FCA register.
It gives various active contact details. Take some time to find a lender’s contact details, typically in the footer of its site. If a lender provides no more than a contact form or an email address, see how responsive it is before you apply. A legitimate short term lender shouldn’t shy away from providing a physical address, phone support or live chat.
It’s upfront about costs. Direct lenders of legit short term loans should be upfront about the fees and charges you have to pay during the loan term, and to adhere to all given maximum limits (if a lender’s quoting a rate higher than 0.8% per day, steer clear). The loan contract should clearly set out all applicable fees and charges.
It doesn’t require money upfront. One of the biggest red flags when researching a lender is if it requests money upfront. You shouldn’t have to pay anything before you borrow.
In our comparison table, we only include direct lenders that are authorised and regulated by the FCA.
First off, make sure that a payday/short term loan is definitely how you want to proceed. Because of the high interest rates involved, only take the loan if you’ve exhausted other options.
Next you should compare lenders and loan durations to find the cheapest loan that would be comfortably affordable for you. You can get an idea of the repayments using the table above.
Once you’ve chosen a lender (and checked that you’re eligible to apply) the entire application will usually take place online. First off you’ll need to give the lender enough details to run a credit search (like your address history for the last three years). In many cases the lenders won’t be put off if you have bad credit, but they do have to make sure that the loan would be affordable for you.
If you’re formally offered the loan and you draw it down, make a note of the terms and the repayment amounts (and dates) and ensure you will have enough in your account to repay your loan.
If you need any assistance the lender will be able to answer questions you may have. Crucially, if you find yourself struggling to make a repayment, you should contact the lender as early as possible – this is the best way to protect your credit record and avoid getting into severe financial difficulties.
These lenders offer incredibly streamlined online application processes that usually lead to in an instant decision. You’ll need to provide up to three years of address history to enable a credit check, plus details of your income and outgoings.
Payday and short term loan companies will often be able to look beyond poor credit, but will need to make sure that they only offer you a loan that would be affordable.
In rare cases, you may be asked to provide additional documentation.
Some short term lenders in the UK will request access to your online banking. This sometimes requires you to provide your login details (if you don’t trust the lender, then don’t do this) or may alternatively require you to log in to your Internet banking to give your bank permission to legitimately share transactional data with a specific third party (your bank will verify that the lender is authorised, before securely sharing your data).
Payday and short term loans are typically for sums between about £50 and £1,000. One of the main factors that dictates how much you can borrow is how much you can afford to repay each month (or week or fortnight). Lenders might not be dissuaded by bad credit, but they will care about affordability.
If you opt to borrow over a longer time frame, you can usually reduce the size of each repayment, potentially making the loan more affordable, but this will push up the overall cost. Bear in mind that if it’s the first time you’re using a lender, it’ll want to start fairly small. Similarly, lenders may see a longer loan term as a greater chance for a borrower to default.
The majority of lenders will take the necessary funds from your account on the same day you get paid, but won’t take the money directly from your pay. In other words it won’t show up on your payslip – your pay will land in your account and then shortly after the payment will be deducted from your account.
It’s usually incredibly quick, with some lenders promising “instant” loans. Realistically it can take as little as 15 minutes, although some lenders are slower outside of office hours.
Many payday lenders allow you to pay out your loan early without any extra fees associated. You will still have to pay the full amount associated with your credit contract. Contact your payday loan credit provider if you need to organise an early payment.
This is often possible, at the lender’s discretion. Payday loans are regulated by the government and designed to be a “stop-gap” solution to financial problems. There are restrictions around “rolling over” loans. If you find yourself needing more than one payday loan, you should consider other forms of credit or seek debt counselling. You can read more about alternatives to payday loans at moneyadviceservice.org.uk and also in our own comprehensive guide.
If you make all of your repayments on time then a lender may approve you for another loan. Some lenders have benefits for repeat borrowers such as increased borrowing amounts, quicker funding or slightly better rates. But keep in mind these loans are not a long-term solution and if you frequently need to borrow money then you may need to consider a longer-term borrowing option or a more stable line of credit. It may help to lower your expenditure each month to overcome your cash shortfall.
UK payday loan companies use a secure online system. Payday loan applications are generally carried out on a secure online application form to help protect your privacy. This system uses a 128-bit secure server and SSL encryption to ensure your personal information cannot be stolen. To verify your income, some payday lenders will need a snapshot of your account for the past 90 days. The services involved are safe and secure and only provide a “read-only” view of your account. There are no personal details transmitted and no access to any other information besides your financial history is needed.
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