What to Consider Before You Apply for a Payday Loan
A payday loan is a form of high-cost short-term credit. It may be used for a temporary financial gap, but it should not be treated as a routine way to cover rent, food, bills or other regular living costs.
Before applying, check the amount you need, the repayment date, the total amount repayable and whether the loan still fits your budget after essential expenses.
How Much Do You Really Need to Borrow?
Start with the exact cost of the problem you are trying to solve. Borrowing more than necessary increases the interest and total amount repayable. Borrowing too little may leave the original problem unresolved and tempt you to apply again.
Use our Budget Calculator to compare the proposed repayment with your rent or mortgage, utilities, food, travel and existing credit commitments.
Check the Total Cost, Not Just the Speed
Payday and other high-cost short-term loans can have a very high APR. Compare:
- the amount borrowed;
- the APR;
- the repayment dates;
- the number of instalments;
- the total amount repayable;
- the consequences of a missed payment;
- any early-settlement terms.
A quick decision does not make a loan affordable. Our How Much Does a Payday Loan Cost? article explains the figures to compare.
How Long Will the Loan Last?
A traditional payday loan is normally repaid in one payment on or shortly after payday. Some lenders now offer short-term instalment loans with several repayments over a longer period.
Product names can overlap, so check the actual agreement rather than relying on the word “payday”. A longer term may reduce each payment but can increase the overall interest paid.
For a clearer comparison, read our Short Term Loans page.
Will You Be Eligible?
Criteria vary between lenders, but applicants will usually need to be at least 18, live in the UK, have a UK bank account and provide accurate identity, address, income and expenditure information.
Employment is not the only possible source of income, but the lender must be satisfied that the repayments are affordable. Income alone does not guarantee acceptance.
What Checks Will the Lender Make?
Responsible lenders carry out creditworthiness and affordability checks. These may include credit-reference information, identity checks, bank-account data, Open Banking or requests for supporting documents.
No responsible lender can promise guaranteed approval or a payday loan without checks. Our What Checks Are There for Payday Loans? guide explains what may happen during an application.
What If You Have Bad Credit?
Some lenders consider applicants with missed payments, defaults or a low credit score, but approval is never guaranteed. A weaker credit history may result in a higher rate, a smaller amount or a declined application.
For wider information, visit our Bad Credit Loans page.
How Will Repayments Be Collected?
The lender will explain the repayment method in the agreement. A Continuous Payment Authority may allow the lender to request payment from your debit card, while other loans may use Direct Debit or bank transfer.
A Continuous Payment Authority is not the same as a Direct Debit. You can cancel it through your bank or card issuer, but cancelling the authority does not cancel the debt. You should still contact the lender and agree how the payment will be made.
What Happens If You Cannot Repay?
Contact the lender before the payment is due. Missed payments can lead to charges, additional interest and damage to your credit record. Do not take another payday loan simply to cover the first repayment.
Read What Happens If I Cannot Repay My Payday Loan? for the practical steps to take.
Consider Alternatives Before Applying
Depending on the situation, a lower-cost or non-credit option may be available. Examples include asking a bill provider for more time, an authorised overdraft, a credit union, local welfare support or free debt guidance.
If the expense is urgent, our Alternatives to Emergency Loans guide covers several options worth checking first.
How Badger Loans Works
Badger Loans is a credit broker, not a lender. We compare the information you provide with participating UK lenders. A lender may then make an offer subject to its own credit, identity and affordability checks.
Read How Badger Loans Works before applying. Badger Loans does not charge customers to submit an application, and approval or same-day funding cannot be guaranteed.
