No-fee payday loans

Payday and short-term instalment loans can provide a lifeline when you’re in a tricky financial situation, but because of their sky-high rates, they should only be used to cover one-off unforeseen expenses, rather than regular payments.

If you’re considering a payday or short-term loan, it’s understandable that a loan without fees attached would appeal, but in fact this feature shouldn’t be your main focus when comparing lenders. Here’s why.

What fees can payday or short-term loans have?

You should always bear in mind that that in almost all cases, the interest you are charged will be the largest expense associated with your payday loan.

Whilst it’s obviously important to check the terms of the specific product that you’re thinking of applying for, you are unlikely to incur fees with payday loans unless you miss a loan repayment.

That said, it’s smart to check for the following fees before you apply for any loan:

• Set-up fee. This is a one-off fee charged to cover the cost of processing a loan, sometimes also referred to as a “product”, “admin” or “origination” fee. Lenders may automatically subtract this from the funds they lend you, or add it onto your outstanding balance. In the world of payday loans, setup fees are few and far between.
• Late payment fee. This is a fee you incur if you’re late making a repayment on your loan. Most payday lenders will charge a one-off penalty for a late or missed repayment. The amount for this fee has has been capped by the Financial Conduct Authority (FCA) at £15 – so that’s what most lenders charge. Other potential consequences of missing a repayment include additional interest and damage to your credit score. You should never enter into a loan if you anticipate that you’ll struggle to meet the repayments.
• Early repayment fee. This is a fee lenders charge to recoup profits when a borrower decides to repay their loan early. Most payday lenders will let you pay off your loan early at any time, without a fee, and will stop charging you interest from that point. There are a few exceptions to this rule, so it’s important to double check before you apply – especially if you think that repaying early could be a possibility for you. Some peer-to-peer (P2P) lenders build their admin fee (or “service” fee, or “platform” fee) into the interest rate – which can mean that if you do clear your loan early, you might still owe them the remainder of their admin fee.

Crucially, don’t forget that if you change your mind about a payday loan, you have 14 days within which you’re able to withdraw from the agreement – that’s known as your “cooling off” period. You’ll need to pay the interest that your loan has accrued in this time, but you’re entitled to a full refund of additional charges.

How to compare loans with no fees

The most important factor to consider when comparing payday/short-term loans is the total amount payable. It’s a more useful benchmark than the representative APR (related to the interest rate) which can fluctuate wildly even for payday loans which are almost identical, and which isn’t really designed with such short-term loans in mind.

Aim to keep the total payable as low as possible, while ensuring the repayments are affordable.

This figure won’t factor in any late repayment charges, but you shouldn’t be accepting loans unless you can be completely sure you can meet the repayments. Even if no one-off late payment charges are made, the additional interest and damage to your credit score is worth avoiding at all costs.

Don’t forget that lenders which don’t charge fees might offset this reduction in revenue with a higher rate – another good reason to focus on the total payable.

Common requirements for getting a payday loan with no upfront fees

All lenders will specify their own minimum eligibility criteria for borrowers. Being eligible means your application will be considered, but is no guarantee of acceptance. Whichever lender you opt for, you’ll likely need to:

• Be over 18 years old
• Be a UK resident
• Hold a bank account
• Be able to prove you have a regular income
• Agree to go through a credit search

Frequently asked questions

• How will I know the total amount payable?

  Payday lenders should always declare this figure upfront. Most have calculators on their homepage that show you the total amount payable. This must also be confirmed during the application process.

  If you’re using a comparison table to compare the totals payable from a range of lenders, this will normally be the figure that the table is ordered by.

• When will I know I’ve been approved for a payday loan?

  Most payday lenders will make instant decisions on your application, and it’s common that the money could be transferred to your bank account within hours.

We compare payday/short-term loans from