Payday loans are small, short-term unsecured loans. There are many of these on the market and payday loans have received a lot of press attention in recent years.
These can be very expensive and the APR is typically several thousand percent. While payday loan companies argue that they are only meant to be used for a very short time, there’s often nothing stopping you using an overdraft or much cheaper loan if you have this facility available.
If you can’t borrow using an overdraft or personal loan, there may be other options:
- a credit union – these specialise in lending small amounts and are often aimed at helping people who can’t access finance elsewhere
- if you receive benefits, you may qualify for an interest-free Budgeting Loan through Jobcentre Plus. These can help pay for essentials such as rent, clothes or hire purchase debt. You can find out more about Budgeting Loans from GOV.UK .
If you do borrow from a payday loan company, try to make absolutely sure you pay back your loan when it’s due. The high interest rate means that if you ‘roll over’ any debt it can mount up and quickly become unmanageable.