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Pay Day Loans

Please think twice before you take out a payday loan!

Struggling with money is nothing to be ashamed about. We have helped thousands of people and we can help you too.

Don’t fall prey to a payday lender. Even if money is very tight and you are struggling to last until your next wages are paid, taking out a payday loan is not the answer and could cause you more problems. Read on to find out more about the dangers of payday loans and the other more affordable options available to you instead.

What are payday loans?

  • Payday loans are short-term loans until your next wages are paid.
  • They are available online and from high street shops with money often loaned to you the same day you apply.
  • Usually, you have to repay the money on the day you get your next wages plus any interest charges and other fees. The lender will take the money themselves straight from your bank account on the day your wages are paid.

Important changes in rules governing payday lenders

A number of investigations into the practices of Payday lenders have been carried out by the Financial Conduct Authority (FCA) and the Competition and Marketing Authority (CMA) and the rules around them have now been tightened up. Rules and regulations have now been tightened and new laws have come into effect. These include:

  • Capping the total amount you have to pay back. The total amount that you will have to pay back to a Payday Lender in fees and interest will never be more than twice the amount you borrowed.
  • A cap of 0.8% interest a day
  • Protection from Continuous Payment Authority (CPA)

These changes are helpful for borrowers but there are still good reasons to avoid payday lenders.

Why payday loans still cost you

Payday lenders charge very high interest rates. Even though the rules around charges have tightened up (see above ) you could still find yourself paying back your loan at rates of up to 292% APR. By comparison, banks typically charge less than 20% APR on agreed overdrafts, credit cards less than 30% APR and your local Credit Union between 13%-27% APR. Payday loans are VERY expensive! Although they charge high interest rates, pay day lenders may not adequately check whether you can afford to pay back a loan.

Most payday lenders won’t lend you money unless you give them a Continuous Payment Authority (CPA). This allows them to take some or all of the money you owe them directly from your bank account on the day your wages are paid, without them needing to contact you. This could leave you short of money or stop your other bills being paid.

Recent changes have given borrowers some protection. Payday lenders are now unable to make repeated attempts for repayment. If you have given permission for a CPA to be used you have the right to cancel it directly with your card issuer. Any payments taken after you cancel a CPA are considered unauthorised transactions and must be refunded.

Other hassles that come with payday loans

  • Damage to your credit rating – even if you pay back the loan as soon as your wages are paid, the fact you used a payday loan will damage your credit rating and can make it very difficult for you to get a mortgage or credit card for several years
  • Pestering from other lenders– after receiving a payday loan you could start receiving lots of phone calls, text messages and emails from lenders offering you more loans
  • Unhelpfulness – payday lenders are difficult to contact and tend not to help you if you have problems with repaying them.

Alternatives to payday loans

There are far better alternatives to using a payday lender. You should be able to get a cheaper loan from a more responsible provider such as the following:

  • Credit Unions – Credit Unions charge much lower interest. A £300 loan from a Credit Union for 6 months will cost you just £22. A payday lender can charge you up to £72 in fees and charges for a £300 loan over just a 30 day period, even if you pay it back on time. Ask your local Credit Union about a low cost saver loan by calling 020 7561 1786 or visit www.credit-union.coop
  • Authorised Overdrafts – you could ask your bank for an authorised overdraft (but avoid going overdrawn without permission).
  • Credit Card - You could use your credit card or ask about increasing your credit limit. This can help if you are disciplined and pay it off over a short period. If you only make minimum repayments, miss a payment or go over limit you could face penalty charges, damage your credit rating and your debt can spiral out of control.

Need Help and Advice?

Are you struggling with money and debt, having problems with a Payday Lender or unable to get a payday loan because of the recent changes?

  • Contact the Islington Advice Line – For free, independent and confidential advice, call 0300 330 1197. This line has advice and help provided by Islington’s Citizens Advice Bureau, Islington Law Centre, Islington People’s Rights and Disability Action in Islington.
  • Contact MA – The Money Advice Service (as advertised on television) is a government funded but independent service to help people manage their money. You can contact them on 0300 500 5000 or visit www.moneyadviceservice.org.uk
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