A short-term advance paid back on your next payday, however due to bad press and increased regulation by the FCA in 2014 many borrowers today prefer installment loans which are typically repayed over 3-12 months in more affordable monthly installments.
- Small loan (typically £100-£1,500) to tide you over for a few weeks up to your next payday
- One re-payment where the loan plus fees & interest is pain on an agreed date (typically your payday)
- Interest rates higher than most other types of loans as you only have the loan for a few weeks (c. 1,300% APR)
- Designed for the short-term due to the cost, this loan is not intended to be taken out regularly or longer-term
Borrow £100-£1,500 over 3-12 months
Full definition of an payday loan further down the page.
Representative APR: 49.7% (variable)
Rates from 43.1% APR to 1,333% APR – Minimum Loan Length is 3 months – Maximum Loan Length is 60 months. Representative Example: £1,200 borrowed for up to 75 days. Total amount repayable is: £1506. Interest charged is 0.34% per day, amounting to £306, annual interest rate of 124% (variable).* Subject to affordability and your credit score.
Warning: Late repayment can cause you serious money problems. For help, go to moneyhelper.org.uk
All Credit Loans is a trading style of Max Your Finance Limited which is an FCA Licensed Credit Broker and not a lender.
Full Definition of a Payday Loan
- Definition: A short-term, high-cost loan designed to be repaid in full, along with interest, by the borrower’s next payday.
- Duration: Typically lasts for a month or until the borrower’s next payday.
- Loan Amount: Usually for small amounts, often between £100 and £1,000.
- Interest Rates: Notable for having significantly higher interest rates compared to other forms of credit. APR (Annual Percentage Rate) can be 1,000% or more.
- Purpose: Often used to cover emergency expenses or financial shortfalls before the next payday.
- Direct Debit: Repayments are often taken via direct debit from the borrower’s bank account on their payday.
- Rollovers: If a borrower cannot repay, some lenders may offer a rollover or extension, often incurring extra fees and interest.
UK Regulation of Payday Loans
- Financial Conduct Authority (FCA) Regulation: In 2014, the FCA introduced strict regulations for payday lenders to protect consumers from unfair lending practices.
- Interest Rate Cap: The FCA introduced a cap on payday loan charges in 2015. Borrowers must never pay more in fees and interest than 0.8% of the amount borrowed per day.
- Total Repayment Cap: The total amount to be repaid by borrowers must never exceed double the amount they borrowed.
- Default Fees: There’s a cap on default fees. If borrowers default, they cannot be charged more than £15, plus the interest on the amount borrowed.
- Stricter Affordability Checks: Lenders must conduct thorough checks to ensure borrowers can afford the loan, taking into account their income and outgoings.
- Rollover Limit: The number of rollovers a loan can have is limited to two. This prevents the debt from continuously rolling over and accumulating more fees and interest.
- Information: Lenders are required to provide clear information about the risks of not repaying on time, including the potential impact on credit ratings and additional charges.
- Debt Advice: If borrowers struggle with repayment, lenders must point them towards free debt advice.
These regulations have been put in place to protect consumers from accumulating unsustainable debt and to ensure that payday loan companies lend responsibly.