What is it?
It is a lump sum of money you borrow from a payday lender, and pay back over a short period, such as a week or a month.
You do not need a strong credit record to get approved for a payday loan. However, it is usually the most expensive type of borrowing you can get.
How does it work?
You borrow a small amount of money, usually £50 to £1,000, and pay it back over a term you choose.
All payday loans charge a high interest rate, so the sooner you can pay the money back the less you need to pay in interest.
Find out the interest you will pay by getting a quote from each lender's website. To get the cheapest payday loan, compare quotes from as many lenders as possible.
How do you pay it back?
You can choose how long you want to pay the money back during the application process. Most lenders let you pay monthly, but only if you choose a term longer than a month.
Some payday lenders expect you to pay back the full amount in one payment, but this is usually for shorter term loans of 28 days or shorter.
After you get your loan money you can choose to pay it off early, to reduce the amount of interest you pay, or borrow more. Here are all your options once you get approved.
What else to think about
Try and get a cheaper type of borrowing, and only apply for a payday loan as a last resort.
A payday loan can affect your credit record, whether you are applying for your first loan or you already have one.
Find out how a payday loan affects your credit record here.
Payday loan FAQs
What if my application is declined?
Ask the lender why. You should also find out if there are any issues with your credit record.
What does responsible lending mean?
Lenders can only let you borrow money if you can afford to pay it back. Here is more information on the rules a payday lender must follow.
How many payday loans can I have?
There is no limit, as long as you pass the lender's credit check process and give honest information about any existing loans you have when you apply.
Are all payday lenders regulated?
It is a legal requirement for payday lenders to be FCA regulated, but not all are. Use our comparison to find FCA regulated payday lenders.