Why get a payday loan?
Applying for a payday loan should be a last resort, as they leave a mark on your credit history and can charge you more than any other type of borrowing.
Only apply for a payday loan if you cannot get any other type of borrowing and you need the money urgently.
Before you compare rates, here are the pros and cons of applying for a payday loan:
Bad credit accepted
Easy to apply
Borrow small amounts
Get cash fast
Short term only
Credit check needed
High potential charges
A payday loan is not the only way to get money fast, here are some alternatives.
What are the costs?
There are two costs to think about before you apply for a payday loan:
Interest: This is what you pay a lender to borrow money, and is usually shown as the annual percentage rate (APR). The interest you pay is spread over all your payments, meaning you could pay less if you clear your loan early.
Payment fees: These can be for either missing or being late with a payment, e.g. £15 for each missed payment. The lender could also report your missed payment to credit agencies, making it harder for you to apply for credit in the future.
How does APR work?
The APR represents the interest you would pay over a whole year.
As payday loans are usually taken out over a much shorter term, the APR does not give a fair reflection on how much interest you pay.
Look at the amount you pay back over the term you choose when comparing the costs of payday loans. Find this information when you get loan quotes from each payday lender.
How to get the best deal
Before you shop around to find the best deal, you need to decide:
How much you want to borrow
How much you can afford to pay
How quickly you want to pay it back
Each lender calculates the way they charge you interest differently, so compare the total cost for repaying the amount you want to borrow to find the best deal.
Check if you are eligible to apply for a payday loan, otherwise you could risk damaging your credit record.