{"id":4142,"date":"2019-09-24T08:51:10","date_gmt":"2019-09-24T08:51:10","guid":{"rendered":"https:\/\/www.credit-score.com\/blog\/?p=4142"},"modified":"2022-08-22T14:18:44","modified_gmt":"2022-08-22T14:18:44","slug":"what-is-a-payday-loan","status":"publish","type":"post","link":"https:\/\/www.check.co.uk\/blog\/loans\/what-is-a-payday-loan\/","title":{"rendered":"What is a payday loan, and what are my options?"},"content":{"rendered":"\n<p>Payday loans are short term loans with high-interest rates. They tend to be used to bridge the gap to payday and are negatively viewed by future lenders. <\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_79_2 counter-flat ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">What&#039;s Included?<\/p>\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.check.co.uk\/blog\/loans\/what-is-a-payday-loan\/#Alternatives_to_Payday_Loans_are\" >Alternatives to Payday Loans are:<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.check.co.uk\/blog\/loans\/what-is-a-payday-loan\/#Why_avoid_payday_loans\" >Why avoid payday loans?<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.check.co.uk\/blog\/loans\/what-is-a-payday-loan\/#What_are_my_alternatives\" >What are my alternatives?<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.check.co.uk\/blog\/loans\/what-is-a-payday-loan\/#Family_and_friends\" >Family and friends<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.check.co.uk\/blog\/loans\/what-is-a-payday-loan\/#Things_to_consider\" >Things to consider:<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.check.co.uk\/blog\/loans\/what-is-a-payday-loan\/#Personal_Loans\" >Personal Loans<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.check.co.uk\/blog\/loans\/what-is-a-payday-loan\/#Things_to_consider-2\" >Things to consider:<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.check.co.uk\/blog\/loans\/what-is-a-payday-loan\/#Credit_Card\" >Credit Card<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.check.co.uk\/blog\/loans\/what-is-a-payday-loan\/#Things_to_consider-3\" >Things to consider:<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.check.co.uk\/blog\/loans\/what-is-a-payday-loan\/#Speak_to_your_employer_with_regards_to_your_payday_loan\" >Speak to your employer with regards to your payday loan<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.check.co.uk\/blog\/loans\/what-is-a-payday-loan\/#Credit_Unions\" >Credit Unions<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.check.co.uk\/blog\/loans\/what-is-a-payday-loan\/#Things_to_consider-4\" >Things to consider:<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.check.co.uk\/blog\/loans\/what-is-a-payday-loan\/#Use_your_overdraft\" >Use your overdraft<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.check.co.uk\/blog\/loans\/what-is-a-payday-loan\/#Things_to_consider-5\" >Things to consider:<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/www.check.co.uk\/blog\/loans\/what-is-a-payday-loan\/#In_Conclusion\" >In Conclusion<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/www.check.co.uk\/blog\/loans\/what-is-a-payday-loan\/#Credit-Score_offers_two_fabulous_solutions\" >Credit-Score offers two fabulous solutions<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Alternatives_to_Payday_Loans_are\"><\/span>Alternatives to Payday Loans are:<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\"><li>Family and friends: The initial conversation might be awkward, but they\u2019ll want to help in any way they can. Make sure you discuss when you will pay them back.<\/li><li>Personal loans: You may need to borrow more money over more time, but this is a great alternative. You can search with <a href=\"https:\/\/www.check.co.uk\/\" target=\"_blank\" rel=\"noreferrer noopener\">Credit-Score <\/a>here. <\/li><li>Credit Cards: You can get promotional interest rates as low as 0%! <\/li><li>Speak to your employer: See if you can get an advance on your salary.<\/li><li>Credit Unions: These not-for-profit organisations can offer you lower interest rate loans.<\/li><li>Overdraft: Consider using an authorised overdraft. If you don\u2019t have one, contact your bank to see if they will offer you one. <\/li><\/ul>\n\n\n\n<p>Payday loans are, as the name suggests, loans which you tend to take out to bridge the gap to payday. They tend to be for lower amounts over a short period and have very high-interest rates. You may decide to take a payday loan out if an unexpected cost arises, such as your boiler breaking or the car breaking down. <\/p>\n\n\n\n<p>Payday loans haven\u2019t had the best press &#8211; in 2017, new\nregulations came into force, and a cap was put in place in 2015 of 100% of the\nloan amount: this means that you will never have to pay more than double the\namount you borrowed in the first place. Payday lending remains the most\nexpensive form of borrowing. <\/p>\n\n\n\n<p>It\u2019s a good idea to be aware of your options when it comes\nto borrowing money in the short term. There are plenty of different\nalternatives that won\u2019t cost you nearly as much and will have a better impact\non your credit report. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Why_avoid_payday_loans\"><\/span>Why avoid payday loans?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\"><li>The rates of interest applied to payday loans can be staggering, especially if you need to extend the borrowing time. <ul><li>In July 2019, the typical interest rate for a payday loan was 1300% annually. No, I did not accidentally add a zero. <\/li><\/ul><\/li><li>Your affordability is often not checked prior to approval \u2013 this means you may struggle to pay it back. You can end up trapped, paying more and more in fees each month, and never managing to repay the loan. <ul><li>One in four payday loans are rolled over for another month. That\u2019s a quarter of people unable to pay their loan back at the end of the month. <\/li><\/ul><\/li><li>Your credit report won\u2019t thank you. Other than going bankrupt, payday loans have the most negative impact on your credit report. This means that any hard work you have done in getting your creditworthiness as high as you can will be for nothing, destroyed by a payday loan. <ul><li>This is because lenders will see that you\u2019ve struggled with money, even if you paid it back on time \u2013 it\u2019s not having this on your credit report at all if alternatives are available. <\/li><\/ul><\/li><li>You don\u2019t get very long to pay the money back<ul><li>The main issue here is the fees and extra costs that will hit if you don\u2019t pay the money back in the tight window that you have. You may end up with a lot more debt than you initially took out.<\/li><\/ul><\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_my_alternatives\"><\/span>What are my alternatives?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The good news is, there are plenty of other means of\nborrowing that you can consider. This isn\u2019t a definitive list of options, and\nsome may be more suited to you than others. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Family_and_friends\"><\/span>Family and friends<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>It\u2019s difficult to admit to your family or friends that you\u2019re struggling financially. A study has shown that people are more likely to share their favourite sex position with a stranger than their bank balance, so you\u2019re not alone here. But, imagine the tables were turned, you\u2019d want to help a friend or family member instead of letting them use a payday lender, wouldn\u2019t you? Sometimes, you just need to swallow your pride and make that phone call. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Things_to_consider\"><\/span>Things to consider: <span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\"><li>Make sure you discuss when you\u2019ll pay the money\nback before they lend it to you, to reduce the risk of ruining a relationship.<\/li><li>Check that the person you\u2019re asking isn\u2019t\nstruggling themselves. Sometimes people can be happy to lend out money, but in\nthe background, they\u2019re worried about their financial situation too.<\/li><\/ul>\n\n\n\n<p>The benefits of this are the lack of interest, more leniency with time to pay back, and nothing is reported to credit bureaus. You can sort out payment terms on an informal basis and say thank you with a takeaway or a round of drinks next time you\u2019re out. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Personal_Loans\"><\/span>Personal Loans<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Taking a personal loan instead of a payday loan may require\nyou to have good creditworthiness,\nbut it can save you a lot of money. You may get a better rate by borrowing more\nmoney over a longer period of time than you would have done with a payday loan.\nTake a look at our article on getting the best rate on a personal loan here. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Things_to_consider-2\"><\/span>Things to consider:<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\"><li>You are taking out a loan, so ensure that you\nmake all your payments on time.<\/li><li>Make sure you can afford the payments each month\n\u2013 go through your income and outgoings to ensure you won\u2019t fall into any\ntrouble down the line. <\/li><\/ul>\n\n\n\n<p>The main benefit of a personal loan over a payday loan is the cost, however, it will also do wonders to your credit report, if managed correctly. If you don\u2019t already have a personal loan, you\u2019ll be adding to your credit mix. Make payments on time every month and you can strengthen your payment history. <\/p>\n\n\n\n<p>If you think this might be an option for you, you can sign up for Credit-Score and\nsee your personalised loan offers. These are reflective of your\ncreditworthiness, using a soft search. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Credit_Card\"><\/span>Credit Card<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Credit cards can be a much safer method of borrowing money in the short term. There are plenty of different types of cards to suit your needs, such as purchase cards, balance transfer cards, and money transfer cards. Which one you get will depend on what you will need the money for, you\u2019ll find more on this in our article: Do I need a loan or CC? <\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Things_to_consider-3\"><\/span>Things to consider: <span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\"><li>Credit cards can be fantastic if managed\ncorrectly, try not to use your credit card on a whim for things you don\u2019t need\nand can\u2019t afford. <\/li><li>Make sure you make at least the minimum payment\nevery month \u2013 even if you have a 0% rate!<\/li><\/ul>\n\n\n\n<p>You can get significantly better interest rates with a\ncredit card as well, some even have a promotional period of 0%, so you would\nsave a great deal of money. Having a credit card and using it sensibly will\nhave the extra bonus of increasing your creditworthiness, especially if it is\npaid off in full every month.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Speak_to_your_employer_with_regards_to_your_payday_loan\"><\/span>Speak to your employer with regards to your payday loan<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Financial worries can have a huge hit on your productivity\nand work ethic, most employers will help you work out a solution. You may be\nable to get an advance on your salary.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Credit_Unions\"><\/span>Credit Unions<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Credit unions are not-for-profit institutions that can lend you money with much lower rates of interest. You may need to become a member of one first \u2013 have a look online to see if a Credit Union can help you. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Things_to_consider-4\"><\/span>Things to consider:<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\"><li>As with Personal Loans, you are taking out a\nloan, so ensure that you make all your payments on time.<\/li><li>Make sure you can afford the payments each month\n\u2013 go through your income and outgoings to ensure you won\u2019t fall into any\ntrouble down the line. <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Use_your_overdraft\"><\/span>Use your overdraft<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>If you have an overdraft, this is exactly the type of reason\nwhy you may need to use it. Check if there are any costs to use an authorised\noverdraft first. If you don\u2019t have one, then don\u2019t enter an authorised\noverdraft \u2013 this will probably come with fines or fees. Contact your bank to\nsee if they will authorise one for you. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Things_to_consider-5\"><\/span>Things to consider:<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\"><li>Your bank may have an automated text message for\nwhen you\u2019re close to, or in, your overdraft \u2013 it\u2019s good to turn this on to make\nsure you stay in the black!<\/li><li>Even an authorised overdraft can have fees to\nuse it, take these into consideration!<\/li><li>Overdraft usage will affect your\ncreditworthiness in a negative way, but only if you use it consistently, and\nfar less than a payday loan will. Having an overdraft and not using it, however,\ncan positively impact your report. Using your overdraft instead of taking out a\npayday loan will relieve a lot of pressure on you and cost you less money.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"In_Conclusion\"><\/span>In Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>We all suffer from financial trouble at different points in our lives, whether it\u2019s a one-off everything-broke-this-week or several years of low income. There are plenty of alternatives to taking out a payday loan, letting your creditworthiness and bank balance thrive. <\/p>\n\n\n\n<p>If you are struggling and need help, consider speaking to one of the below.<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Citizens Advice: <a href=\"https:\/\/www.citizensadvice.org.uk\/\">https:\/\/www.citizensadvice.org.uk\/<\/a> <\/li><li>Step Change: <a href=\"https:\/\/www.stepchange.org\/\">https:\/\/www.stepchange.org\/<\/a><\/li><li>National Debt Line: <a href=\"https:\/\/www.nationaldebtline.org\/\">https:\/\/www.nationaldebtline.org\/<\/a><\/li><\/ul>\n\n\n\n<p>Alternatively, you can call your bank and ask them to assist you.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Credit-Score_offers_two_fabulous_solutions\"><\/span>Credit-Score offers two fabulous solutions<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>If you\u2019re preparing to take a mortgage, never apply until you\u2019ve tried our unique and&nbsp;<a href=\"https:\/\/home.credit-score.com\/\" target=\"_blank\" rel=\"noreferrer noopener\">FREE Credit-Score Home app.<\/a>&nbsp;Our smart technology will tell you what you need to fix so you avoid rejection. The app predicts when you will be able to buy, for how much and tracks your month-by-month progress to mortgage success. We\u2019ve even added your own mortgage broker, so you get the best deals available.<\/p>\n\n\n\n<p>More focused on your credit rating? Well, get started for free with&nbsp;<a href=\"https:\/\/www.check.co.uk\/register\" target=\"_blank\" rel=\"noreferrer noopener\">Credit-Score\u2019s 24- Factor Credit Check<\/a>&nbsp;to truly help you improve your creditworthiness and how lenders view you. (Remember: lenders don\u2019t use your credit score! We\u2019ll show you what lenders look for and how to get your credit report in the best shape possible).<\/p>\n\n\n\n<p><strong><em>Last updated by Robert Edwards, July 2022<\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"Payday loans are short term loans with high-interest rates. They tend to be used to bridge the gap&hellip;\n","protected":false},"author":22,"featured_media":4146,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[275,436],"tags":[446,381,445],"class_list":{"0":"post-4142","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-loans","8":"category-payday-loans","9":"tag-loans","10":"tag-money-stress","11":"tag-payday-loans"},"acf":[],"featured_image_src":"https:\/\/www.check.co.uk\/blog\/wp-content\/uploads\/2019\/09\/photo-1504701954957-2010ec3bcec1.jpg","author_info":{"display_name":"admin","author_link":"https:\/\/www.check.co.uk\/blog\/author\/admin\/"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What is a payday loan, and what are my options? | Credit-Score<\/title>\n<meta name=\"description\" content=\"What is a payday loan? Should you get one? In this article we will be explaining what a payday loan is and its pros and cons.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.check.co.uk\/blog\/loans\/what-is-a-payday-loan\/\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"What is a payday loan, and what are my options? | Credit-Score\" \/>\n<meta property=\"og:description\" content=\"What is a payday loan? Should you get one? 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