Debt problems? Get free confidential advice from StepChange Debt Charity on 0800 138 1111.
Your loan may be automatically extended if you don't repay it in full, this may impact your credit score and cost you extra in fees and interest. Failure to pay could mean you face collection action. If you already have a payday loan don't take out another as cheaper options are available; our guides explain.
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Here is some important information about the practices used by many of the payday lenders we list on money.co.uk. To find out about the specific practices and charges applied by your chosen payday loan lender you will need to check their website and read their terms and conditions carefully before you apply.
You should always make repayments on your payday loan on time and in full. The interest rates and information we list in our comparison tables assume that you will do this. Payday loan lenders each have their own policies regarding non-payment, this affects the additional interest and charges they apply and the debt collection practices they use.
If you do not make your agreed repayments on time then you are likely to be charged extra interest and additional fees. Some lenders will also take legal action if you repeatedly fail to repay. How much extra you are charged and the collection practices used for non-payment will depend on the payday loan lender you have borrowed from; you should check this before applying. Your payday loan payments will be taken out of your account automatically. However, if you do not have enough money in your account to cover the payment you are likely to incur extra charges. You are also likely to be charged interest on your balance at that point; this may be more than the original amount you borrowed.
If you think you may have difficulty making a repayment you should contact your lender immediately. Failure to do so could impact your credit score and result in additional charges.
Non-payment will also be recorded on your credit file. Repeated non-payment may have a negative impact on your credit rating and affect your eligibility for future borrowing. You should always make repayments on time and in full to avoid any repercussions on your credit rating.
It is not advisable to renew or extend a payday loan. However, if you do need to you should contact your lender to arrange an extension before they try to take payment. Most payday loan lenders will charge you an extension fee and additional interest on your total outstanding balance. Some lenders will automatically renew or extend your payday loan if you do not make an agreed repayment. This is likely to cost you extra in additional fees, interest and charges. You should check your chosen lender’s approach to payday loan extensions before you apply.
If you fail to make an agreed repayment on a payday loan most lenders will contact you by phone, post or email to rearrange your repayment. If you repeatedly fail to make repayments then they may use collection practices or take legal action. You should familiarise yourself with the collection practices of your chosen payday lender before you apply.
If you are struggling to make repayments on a payday loan you should contact your lender right away. You can also get free advice from debt charities like StepChange, Citizens Advice Bureau and the National Debtline.
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...
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.
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.
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.
Payday loans can give you enough money to tide you over till your next pay cheque clears, but at great cost. We look at whether it's ever worth taking one out, and if so, how to find the one that'll give you the cheapest cash.
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