Payday loans are aimed at those with bad credit, offering quick access to cash, so they may seem like the right choice if you have a poor credit rating and need a loan fast.
However, it's worth looking into the alternatives too because they could work out a lot cheaper. This guide talks you through how else to borrow the money you need, such as using an overdraft, a credit card, or borrowing from a friend: What is the Best Way to Borrow Money Until Payday?
If you decide a payday loan is your only option, you'll need to be careful - they can be dangerous if you can't pay them off quickly and they aren't suitable for the long term. Here's what you need to know...
How do payday loans work?
When you've picked a lender, you can let them know how much you need to borrow and for how long, although some are more flexible on this than others.
Once the form-filling is complete, they'll transfer the money to your bank account, and it'll often be available for withdrawal straight away; it will start to generate interest just as quickly too.
The total amount you'll pay should be made clear when you take the loan out, then the amount you owe will be deducted from your account on the agreed date.
How to find the best £500 loan
Each company will have different rules on when you need to pay back what you owe. Borrowing for longer is usually a lot more expensive, but make sure you choose a repayment date that gives you enough time to raise enough to pay it back as rolling the loan over is a very expensive option.
Check the interest rates and charges, as how much the loan company charge per £100 will determine how much the loan will cost you.
What are the risks of a £500 payday loan?
Payday loans cost so much because of their high interest rates and the fees they impose for borrowing - this will make it even more expensive if you don't pay the money back quickly.
If you don't pay the loan back by the agreed date, you'll face more fees, further pushing up the amount you owe and making it harder for you to pay it off.
As well as increasing what you owe, missing payments will also impact your credit rating, making it even harder to borrow in the future and limiting your options further. Even if you keep up with repayments, just seeing that you've taken payday loans in the past is enough to put off some mortgage lenders so you should think twice before you go down this route and consider all the other possible options before committing to a payday loan.
About our payday loans comparison
Who do we include in this comparison?
We include our panel of direct lenders and credit facilities that offer short term loans. They are all regulated by the FCA, satisfy our screening standards and do not pass your details to other lenders or brokers without your permission. Here is more information about how our website works.
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We have commercial agreements with some of the companies in this comparison and get paid commission if we help you take out one of their products or services. Find out more here.
You do not pay any extra and the deal you get is not affected.