Finding a loan online with bad credit is much easier than it used to be, but paying them back on time is as important as ever. We've looked into how they work, what the risks are and how to make the right choice for you.
How online loans work
Many lenders operate online, meaning you can find deals without leaving the house and compare how much each will cost without contacting each lender direct.
When you've chosen your loan and applied for it, the money is then transferred to your current account.
You will have to pay back what you owe - including fees and interest - by the date specified, which is often within a month. The amount due is usually taken from your account automatically.
Who should consider payday loans?
The high interest rates and fees on payday loans mean that they cost more than most other types of borrowing, even if they're only taken out over the short term.
If you don't pay the money back on the date it's due but roll the loan over, this will push up the amount you owe with more interest and fees, making it far tougher to pay back.
Many lenders will set up a Continuous Payment Authority to use to claim the money you owe them on the repayment date. It lets them make two attempts to take funds straight from your account, meaning you could be left without money needed to pay more urgent bills.
Make sure you have enough in your account to cover the repayment; if not, contact the lender in advance to let them know you're struggling, in case there's a compromise they can offer, like giving you a little more time.
How to find the cheapest online loan for bad credit
There are plenty of alternatives to payday loans - credit cards, an authorised overdraft, borrowing from friends, a guarantor loan or a Credit Union or Budget Loan.
You can read more about the choices available in our guide, What is the Best Way to Borrow Money Until Payday?
If you decide to take out a payday loan, make sure you understand how much you'll be paying back and when, as you'll need to be able to afford to repay it and still have enough left to keep you going for the rest of the month.
The interest rate and fees are important as they will determine how much you pay back in total but you should look at the cost per £100 to get an idea of how one online bad credit loan provider compares to another.
You'll also need to make sure you're able to borrow the amount you require - keep your costs down by making sure you don't borrow more than you need. How much a lender will offer will be determined in part by your credit rating and what you can afford to pay back.