The Truth About Payday Loans for Bad Credit

Did you know that some payday lenders charge more in a single month than credit card companies do in a year?

Portrayed as the saviour of short term borrowers, this highly expensive financial option can literally lead you on the road to financial ruin and in the article below we explore why you shouldn’t believe all the positive spin that you read.

1. Clever marketing to hide the truth

Clever marketing and PR from payday lenders have seen their products portrayed as the “quick and easy” or “hassle free” solutions for UK borrowers.

However, the reality is somewhat different to this. When compared to some of the current alternatives, the interest rates are absolutely astronomical.

Warning – Payday lenders are obligated to display their APR (Annual Percentage Rate) and this gives a valuable insight into just how expensive they can be – the current representative example on the Wonga website is a whopping 5853%.

For more information, check out the following Guardian article titled – What is a payday loan – and why are they so controversial?

2. APR is very relevant, event though they try to tell you otherwise

Whilst payday lenders claim that the APR is largely irrelevant due to the fact you cannot borrow the money over a year, the truth is that because you can continue to re-arrange your repayment dates, any charges or interest rates are very relevant indeed and can lead to far reaching consequences.

Warning – Making a poor credit rating worse can lead to difficulties obtaining a mortgage, a credit card or even a mobile phone contract.

Are they all bad then?

As with many things, there are a number of advantages and disadvantages and below we have highlighted some that we believe you should pay particular attention to:


  • Your recent personal finance history is likely to be irrelevant
  • The likelihood of eligibility is very high
  • They are unsecured (you will not have to offer any form of security against the balance of the money that you have borrowed)
  • They are available very quickly


  • They are extremely expensive
  • The absence of pre-agreement checks on the financial status of the borrower can lead to lending money to someone who simply cannot afford it
  • Failure to repay can lead to charges escalating quickly
  • Their presence on your credit record can act as a red flag for future lenders
  • Payday lenders make a profit out of preying on those who are the most vulnerable.

Do you know your credit rating?

One of the most important things to do before applying for any type of loan is to get an up-to-date credit report to get an accurate look at your rating. This is important because the level of your rating is very likely to dictate the number of options which you have available.

Rather than paying the major UK credit reference agencies a call (all of whom may have slightly different information resulting in varying scores), simply visit Checkmyfile to obtain the UK’s only multi-agency report.

See more than twice the information compared to any other Credit Report in the UK

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Did you know there are better cheaper alternatives?

Payday lenders count on the fact that many of their borrowers are unaware that they may be eligible for other cheaper alternatives.

The high profile of this type of finance and the constant barrage of advertising ensures they remain constantly in the public eye. It is essential that anyone thinking of using this option, first does a little homework to see if better options are available.

Use our calculator below to work out how much you can comfortably afford to borrow and use our application form to make submissions to a number of the UK’s most reputable lenders.

Within minutes you will begin to receive no obligation offers which offer significantly better value.

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Helen Taylor
David Whitfield
Francesca Portland

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