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|Max loan||Max term||Rep APR|
|The Money Platform|
|Total amount payable:||£118.78|
Representative Example - Borrow: £1000 for 12 weeks, Interest rate:109.5%, One repayment of:£1252 and Representative:165% APR
|Total amount payable:||£152.17|
If you borrow £200 for 90 days, the total amount repayable is £302.82 to be re-paid in 3 equal instalments of £100.94 on your next 3 pay days. Interest is Fixed at a rate of 292% per year - 0.72% interest per day. Representative APR 1265%. Maximum APR: 1,401.45%
|Total amount payable:||£152.17|
Representative Example: Borrow £400 over 3 months. Interest rate 292% pa (fixed). Two repayments of £200.38. One final repayment of £200.37. Total amount payable £601.13. Representative 1,286% APR.
|Total amount payable:||£152.17|
Representative Example: Total amount of credit £80, duration of the agreement 29 days, rate of interest 292% per annum (fixed), total amount payable (in one repayment) £98.56. Representative 1281.8% APR
|Total amount payable:||£152.17|
Amount of credit: £500. Interest rate: 0.8% per day for up to 40 days (292% per annum (variable)). Representative 68.7% APR (variable).
|Total amount payable:||£152.17|
Amount of credit £250.00 for 30 days. Total amount payable £310.00. Interest rate 292% (fixed). Interest £60.00. Admin Fee £9.95.
Compare Payday Loans
Borrow up to £1,500 and repay on your next payday
What are payday loans?
Last Updated:. A typical loan involves two parties; the lender and the borrower. The lender provides the borrower with a particular sum which is expected to be returned in full along with an interest surcharge. The surcharge compensates for multiple risks that the lender takes on such as the credit default risk (the probability that a borrower would default), exposure risk (the risk of opening up to exposure), and in some rare cases, country risk as well (the probability of foreign assets being frozen by the government). The higher the risk, the higher the premium.
A payday loan works on exactly the same principle. The lender lends out the required amount to the borrower with a premium expected to be returned with the principal amount. However, these loans have a shorter term period than conventional loans, usually under a month. This is also why they are called Payday loans in the first place; the principal and interest payment are to be returned upon the borrower’s next pay check.
Payday loans generally allow you to borrow up to £2,500 from an online lender and the repay on your next pay date. The money is transferred to your bank account in one lump sum and the borrower must repay the loan amount and interest when their salary next goes into their account, usually the last Friday of the month.
Depending on the lender, first time customers can borrow up to £500 but once you have repaid a loan successfully, you can borrow as much as £2,500, depending on the lender. The amount you can borrow will depend on a number of factors including your credit history, income and the lender’s criteria.
Since the loan will be repaid on your next pay date, a typical payday loan will last 7, 14 or 21 days but some lenders will allow you to repay up to 60 days later or repay over 3,6 or 12 months in instalments.
Repayments are made automatically by the lender on each pay date using a process known as Continuous Payment Authority. This allows lenders to collect repayments from your debit card in one smooth transaction so you don’t have to worry about making a manual payment on your pay date.
Payday loans are classified as unsecured loans, meaning that they aren’t backed by a solid line of credit such as the borrower’s credit history or FICO scores. The only document that the lender holds on to is the borrower’s next pay cheque. If the cheque bounces, the lender has the right to deduct additional fee upon collection. These days, it is also common for lenders to have electronic access to a borrower’s bank account in lieu of a physical cheque.
Due to the low eligibility requirements, it’s relatively easier for borrowers to acquire a payday loan as compared to a normal one, especially if the borrower has a blemished credit history. In fact, many lending institutions often advertise “no credit checks” in order to attract more customers.
On the flipside however, payday loans have a shorter term period as compared to long term securitized loans. While the average mortgage length in the U.K is 25 years, the term length for these loans is generally about 2 weeks. Though they may be refinanced through the same vendor, many governments are now outlawing this practice. The borrowing amount is generally small, ranging from £200 to £2500.
The loans also have a higher interest rate as compared to traditional loans. This is because the loans are subject to higher credit default risk as a result of the lower approval requirements. The average premium range on a 2 week payday loan is about £15-£25, which amounts to an APR of almost 400%.
This seems to be much higher than the APR on a credit card, which is about 13%, and is cited by many as one of the reasons why Payday loans are unfair to the borrower. It must be noted however that the figure is often misrepresented. A payday loan is supposed to be a onetime loan to help the borrower in case of a liquidity crisis so multiple loans and compounding are not to be expected. Credit card vendors, on the other hand, rely on continuous borrowing and monthly compounding in order to generate profits.
To apply, simply click on one of our featured lenders in the table above. This will take you directly through to their website where you will be asked to fill in the application and if successful, the funds will usually be transferred to your bank account on the same day.
We are a direct affiliate of the companies we feature and we are passionate about working with direct lenders only. We do not take any of your details and sell them onto any other companies and our service is completely free to use.
What is the criteria for applying?
The criteria for payday loans will vary between lenders but the general requirements are as follows:
- UK resident
- Over 18 years of age
- Working debit account
- Working mobile phone and email account
- Full time or part time employed with minimum take-home of £500 pm
An online application will only take around 5 minutes to complete and once you have filled in all your details, the lenders will carry out a series of a checks to see if you are eligible for a loan.
Most lenders require a certain credit score or affordability prior to approving a loan. You may be required to confirm some details over the phone and verify your employment by providing a copy of your pay-slip or bank statement. Some companies may also accept past payment proofs such as payment stubs or cashed cheques instead. By checking your salary, the lender can match up how much you wish to borrow with what you can afford to repay and therefore find the best loan product for you.
Although a minimum credit score and level of affordability is required, there are also lenders who offer bad credit payday loans and for those people on benefits. Finally, a relatively healthy checking account would also be required for verification.
If you application has been successful, the funds can usually be transferred to your debit account electronically within one hour, one day or 48 hours.
Who Should Use Payday Loans?
Payday loans have received a lot of bad press over the past few years, and for good reason. The interest rates on these loans are very high as compared to other financial instruments such as bank loans. Because of this, borrowers often tend to get stuck in a debt cycle as they are not able to pay off the fee, let alone the principal amount. But the problem isn’t the interest rate; it’s high in order to compensate for the default risk associated with low credit worthy borrowers. Part of the problem lies with the borrowers themselves.
The average Payday borrower is white, female and ranges from 25-44 years old according to a study by The Pew Charitable Trusts. However, other groups have also been identified as more likely to apply for a loan, most notably those with income below $40,000 a year. But that’s not the most interesting highlight of the study; it was also found that borrowers usually take a loan to meet recurring expenses, not for onetime expenses.
There have been several reports of debtors borrowing money to fund lavish purchases such as laptops and even cars. Payday loans aren’t supposed to be treated like normal loans in the first place; they are supposed to be a onetime thing to bail a person out during times of despair. This is why many government officials in the U.K. have proposed amendments to regulate how borrowers use Payday loans.
What are the reasons for taking out a payday loan?
Payday loans are typically used for short-term emergency expenses. So if you have a broken down car, an expensive medical bill or a boiler on the brink but you don’t have enough money that month to cover the cost, the idea is that the loan will help tide you over until payday. So when you next receive your income from work, you can repay your loan and be in a better financial position.
When you need money because of something urgent, you need the money fast so you can understand why borrowers in the UK look for payday loans online where you can receive funds within the hour.
It is best to have money saved away for a ‘rainy day’ and this usually involves having around 3 to 6 months of your salary saved in a bank account or a safe place and only using it for emergency purposes.
However, we appreciate it is not always easy to save money and especially when you have an emergency which comes from out the blue, you sometimes need a little extra finance to help you through the month. With Quiddi Compare, you can assess your options and compare the different rates offered by lenders and for how long, allowing you to make an informed decision on your loan.
Why is it important to compare payday loans?
Borrowers can save a lot of money if they compare payday loans effectively. This is because all payday lenders have different rates of interest and terms of the loans that they offer.
Recent studies carried out by the Competition Market Authority showed would typically apply with the same lender over and over not realising that there are cheaper alternatives available. By finding a cheaper payday loan, the average customer could save over £100 a year. Source: Gov.uk
Payday lenders offer their rates in the form of APR and this refers to the Annual Percentage Rate. It might be confusing that the percentage is in the thousands but this is because APR is based on the payday loan as if it were taken out for an entire year and therefore has been multiplied. APR is the consistent measure of interest of all loan and financial product so it serves as a useful comparison tool.
Other ways to compare payday loans involves looking at the daily interest rate that has been capped at 0.8% per day or the cost per £100 that has been capped at £124. Please also use the repayment examples we have provided to give you a better idea of what you would repay. Any repayment example below this price cap suggests a very competitive rate. You can read more here about understanding the costs of payday loans.
When using a payday loan comparison tool like ours, you should be able to find a lender that suits what you are looking for – whether you want to repay over a longer period of time or if you need to find a lender that can transfer funds immediately.
The best payday loan lenders are those that carry out affordability and credit checks, handle your data securely and allow you to repay your loan early. So if you decide that you have the funds earlier than your pay date and are ready to repay sooner, you have the flexibility to do so and save money in the process. This is because you will only be charged the daily interest that you have accumulated up to that point. To give an example, if you have a 30 day loan and decide to pay after 20 days, you will only pay 20 days worth of interest and therefore not have to pay the full amount.
Using a comparison site, you may also find new payday lenders that have just entered the market and offer more competitive rates. We are always looking to feature new lenders and partners on our website so they can offer competitive rates for our customers.
What if my application is not successful?
If your application with one of our chosen lenders is not successful, your details will not be sold on to any other third party companies and no fees will be deducted from your account.
Borrowers must be vary of applying with too many lenders because every time you do, the company will run a credit check and this will leave a footprint on your credit file for around 12 months.
So if you make too many applications in a short space of time, it will negatively impact your credit rating and show other lenders that you are in desperate need of cash.
When applying, always provide accurate and correct information, as you may be required to prove things like employment status and income later on.
What happens if you cannot repay?
If you cannot make your loan repayment on time, there is usually a one-off default fee charged by the lender which is a maximum of £15. In addition, a mark will be left on your credit file stating that you have missed repayment – so this could affect your ability to access credit in the future.
Lenders are required to offer forbearance and flexibility so always get in touch quickly if you know that you are not going to be able to repay on time. Several of the good companies we deal with will allow you delay your repayment or set up an arrangement to pay lower amounts without damaging your credit score. Read here for more information.
Some vendors will offer rollovers whereby your extend your loan, but this can get expensive very quickly so only pursue this if you have considered how you are going to pay off the debt.
Payday loans can be an expensive form of finance and should only be taken out for genuine emergencies and not to fund a material lifestyle. Borrowers should always consider how they are going to repay their loan before applying.
History of Payday Loans
Though lending and borrowing may seem like a modern day phenomenon, it has been practiced since the first formal financial institutions were established. But banking hasn’t been as accessible as it has been in the last 50 years. In the beginning, banks would offer their services only to the wealthy, safeguarding their property while providing them with liquidity when needed.
The concept of short term lending had existed for hundreds of years in the form of a barter system. However, official reports trace Payday loans back to 19th century America, where it was common for coalmine workers with low wages to borrow from mine owners in order to make ends meet. Overdrafts and bank accounts were still in their infancy and could only be procured by a small percentage of the population. Household commodities such as food and clothing were the most borrowed items at the time; the principle amount plus a premium would automatically be deducted from the workers’ next pay. Payday loans, Cheque cashing and pawn broking were the go-to financial instruments for the working class during that era.
The practice, though unlicensed, eventually spread out and started gaining public attention. While the majority of the loans were illegal, it wasn’t seen as such by the authorities and no regulations were introduced. As the demand for these loans grew, many loan sharks started advertising themselves as Payday lenders, resulting in a string of controversies. Borrowers would be threatened with excessive force by collectors, often resulting in violent incidents. The most prominent of these is the 1935 beating of a young clerk who failed to repay his debt. The matter became a national issue, prompting a series of investigations by the New York governor at the time, Thomas E. Dewey. As a result, more than 25 individuals were charged and arrested for using unfair collection tactics and the term “Payday” became synonymous with loan sharks.
As a result of the bad press as well as the aforementioned incident, many U.S. states imposed anti-usury measures such as interest capping in order to discourage lending. Even the metropolitans, such as New York and Chicago, were capped at a rate of 6%, the lowest seen in the past ten years. The anti-usury laws allowed for states to cap the interest rate of nationally charted banks, even if they were conducting business in other states. This made it quite difficult for borrowers to acquire loans from official institutions as they weren’t willing to provide high risk loans at a reduced interest rate.
In what seemed like a case of history repeating itself, the new regulations gave way to numerous underground lending shops just as they did in the Prohibition era; Payday loans were cast in the negative light yet again. The industry seemed well on its way to a slow and steady death until the late 70s, when the anti-usury laws were challenged in the high profile case of Minneapolis v First of Omaha Service Corp. The verdict overturned the state’s authority to set a fixed interest rate in other states. Many saw this as a prime opportunity to lend out short term loans for profit. And with the relaxation of the interest capping laws, a lot of short term lenders partnered with banks to provide rebranded products such as “high interest bank loans”. The foundations for legal short term borrowing were set during that period.
Though many banks and credit unions started offering short term high risk loans, they weren’t really Payday loans. There was no postdated cheque placed as collateral; in fact, many of the bank loans required a credit record in order to be approved. William Alan Jones Jr., a businessman from Cleveland, came up with the idea of offering cash in exchange for a payroll cheque, a first in over 50 years. He went on to establish the Check into Cash enterprise in 1993 based on this business model.
Even though Jones was criticized for allegedly buying out the state legislation to allow for relaxed interest rates, he had, in effect, formed the archetype for modern payday lending. Just six years after Check into Cash was established, $8billion in loans was issued in the U.S. alone. 5 years after that, this number increased to $50billion, more than a 500% increase. Seeing the success of the product, many other countries adopted payday lending, most prominently the U.K. and Australia.
Payday Loans in the U.K
Though Payday loans originated in America, their use has become so widespread in the U.K. that according to a survey conducted by the ACCA, the Payday loan industry has multiplied 8 times in size within the last decade.
The loans were first introduced back in the early 90s, when U.S. based companies decided to branch out internationally. Several payday companies such as “The Money Shop” were set up and the market started growing from there.
While the growth was impressive, it was pale in comparison to the growth that occurred after the 2008 financial crisis. As banks tightened their credit criteria, many failed to qualify for loans and started looking towards Payday loans for liquidity.
Their use has grown exponentially since then. The 2009 statistics showed a 400% growth since 2006, the industry being valued at £1.2billion. This figure increased to £2.2billion in 2012 with an estimated 8.2million loans taken out that year. Whereas Payday loan was an unknown term just 2 decades ago, the average U.K. resident saw about 150 Payday adverts in that year.
The rise was not without controversy, as several politicians accused Wonga, the largest payday lender in the U.K., of charging unfairly high APR percentages in 2011. The company, along with CashGenie, was also accused of sending threatening letters and emails to borrowers who were behind on payments.
Because of the aforementioned incidents, the FCA made several amendments regarding Payday laws in 2014. FCA chief Martin Wheatley stated:
“For the many people that struggle to repay their payday loans every year this is a giant leap forward. From January next year, if you borrow £100 for 30 days and pay back on time, you will not pay more than £24 in fees and charges and someone taking the same loan for 14 days will pay no more than £11.20. That’s a significant saving.
For those who struggle with their repayments, we are ensuring that someone borrowing £100 will never pay back more than £200 in any circumstance.
There have been many strong and competing views to take into account, but I am confident we have found the right balance.
Alongside our other new rules for payday firms – affordability tests and limits on rollovers and continuous payment authorities – the cap will help drive up standards in a sector that badly needs to improve how it treats its customers.”
Following up on these comments, new interest caps of 0.8% per day were set, with the fixed default fee capped at £15. The purpose of these amendments was to raise borrower awareness about the costs associated with procuring a Payday loan while making sure that lending institutions avoided bad loans.
The new regulations did have a positive outcome for lenders, with just 2 interest only rollovers allowed per loan. Rollovers allow borrowers to pay the interest in the first month, delaying the principal amount repayment to the next. The regulation was a much needed step as the Telegraph reported in 2013 that as many as 34 out of 100 lenders were promoting multiple rollovers.
Types of Payday Loans
While the basic concept behind Payday loans remains the same, many new products have been introduced to cater to the growing demand.
Online Payday Loans
As the name implies, an online Payday loan allows for the borrower to fill the application online instead of a physical entry form. A maximum borrowing period of 2 weeks is offered by most lenders in the U.K. The borrowing amount can range from £300 to £1000 and a premium of 20% can be expected on average.
Online Payday loans are the most common type of short term loans issued. It is expected that they will replace the traditional payday application completely within the next few years. Even though the application process is online, most lenders would require proof of employment or a source of income for the borrower. As such, documents such as payroll or past cheques will need to be faxed to the lenders.
No Fax Payday Loans
In essence, No Fax Paydays are the same as online Paydays with one minor difference; there is no faxing of documents required. The lender makes a phone call to the borrower for the required information and verifies it through online databases, adding to the consumer’s convenience. The eligibility requirements for No Fax Paydays are quite relaxed as compared to other types of loans; the applicant just needs to be above 18 and have an income of £1000. However, the borrowing limit is generally lower at about £500. The premium and term period for such loans is the same as for online Paydays. It may take longer for applications to be processed due to verification of income information. No fax loans may also be referred to as Paperless loans.
Instant Payday Loans
Instant loans are online based loans provided as soon as the application is approved. As soon as the application form is submitted, lenders contact borrowers through phone or email for income information and the entire process is completed within 24 hours. Some services even offer bank wiring for an additional fee. The amount that can be borrowed ranges from £100 to £1000, with the premium ranging from £15-£30 depending on the borrowing period.
Instant Payday loans are a good option for people stuck in an emergency without any means of rectification. The amount is available for use on the same day, but the loans can be relatively expensive due to the wiring fee involved. The bank may also charge an additional receiving fee in certain cases. Instant Payday loans are also referred to as 24 hour Payday loans.
1 Hour Payday Loans
If you haven’t deduced it already, 1 hour Paydays are instant loans processed within an hour of applying. The funds are made available to borrowers as soon as the application gets approved. These loans usually do require collateral in the form of a postdated cheque, but some lenders may waive off that requirement. A maximum of £1000 may be borrowed, with the range increasing proportional to the income figure. Like instant loans, 1 hour loans are also expected to be returned within a 2 week period. The loans also have a higher overall cost due to the wire fee.
30 Day Payday Loans
Sometimes, the usual 2 week period just isn’t enough to repay a loan. 30 Day Payday loans take care of that; the term period for such loans is 30 days, with £1000 being the upper borrowing limit. But the same principle of maturity risk applies here; as the borrowing period is longer, so is the premium. The average premium for a £100 loan is £30, making them more expensive than the usual Paydays. There’s also the fact that 30 Day loans may not be processed as quickly. The average deposit time is about 4-5 days.
Bad Credit Payday Loans
Bad credit loans are ideal for people with a spotty credit history or a low credit score. The USP of these loans is that there are no credit checks involved. Creditors already assume that is the case, making the process redundant. All a borrower needs is a valid checking account and proof of income. But since there is an inherently higher default risk for the lender, the premium for these loans is also higher at around 28% of the principle amount. On the plus side, bad credit loans are allotted quicker than other types of loans due to the exclusion of the credit checking process. The term period for these loans is again 2 weeks, but some lenders may offer terms of 3 and even 4 weeks. Bad credit loans are also known as no credit check loans.
Military Payday Loans
Some lending institutions have designed special payday loans for military servicemen known as Military Payday loans. These loans have a very high borrowing limit; up to 35% of the monthly income. They can also be transferred to overseas personnel instantaneously using Western Union. Background checks are also not conducted as the high ethical standing and moral codes of servicemen suffice. Applicants should note that some military charters impose punishment on personnel who are unable to meet their financial obligations.
Low Fee Payday Loans
Low fee loans address one of the major points of criticisms regarding Paydays; the high fees associated with them. The average premium charged on a low fee payday can be as little as 8%, which means the borrower will be paying jus $8 on every $100 borrowed. However, the low fee comes at a cost; lenders for these loans do conduct background checks and approval isn’t guaranteed. The amount also takes longer to be deposited, averaging 1-5 days. The borrowing period is the same at 2 weeks, but unlike other loans, lenders do not usually allow for refinancing.
Credit Based Cash Advance Loan
The terms cash advance and Payday loans are used interchangeably in most cases. Even though they are the same in theory, a cash advance may be of two sorts; a credit based cash advance or an income based cash advance. In case of the former, the maximum borrowing limit depends on the borrower’s line of credit i.e. his credit scores and past credit history. An income based cash advance determines the maximum borrowable amount based on the income of the borrower. While both are viable options, most people prefer to go for income based advances as they are easier to acquire.
What payday loan alternatives are available?
There are several alternatives available where you can borrow up to £2,500. Whilst these may seem cheaper, they may require you to put something down as collateral or you may have to wait longer to receive your funds.
One of the smartest and most affordable alternatives to payday loans is borrowing from a credit union. With a typical APR of 26.8%, these not-for-profit organisations allow you to borrow a few hundred pounds at low rates. However, to be eligible to borrow from your local credit union, you must have a job in the public sector such as teacher, nurse or policeman. Also, the funds may take between 1-2 weeks to be transferred to your account.
Guarantor loans allow you to borrow up to £7,500 for as long as 5 years provided that you have an extra person involved in the transaction to act as your ‘guarantor.’ This person is likely to be a close family member, colleague or friend and they will agree to cover the cost of your loan if you cannot. With an APR of around 49.9%, this product is ideal for those with bad credit as the borrower is able to benefit from their partner’s credit rating in order to get the funds they need.
Logbook loans enable you to release the equity from your vehicle in order to borrow money. By putting your car, van or bike down as collateral, this secured loan lets you borrow up to £50,000 and repay in monthly instalments over 3 years, but you risk the repossession of your vehicle if you are unable to keep up with repayments.
Credit cards are one of the most popular and simplest ways to borrow money. By receiving a ‘credit limit’ based on your financial circumstances, you are able to borrow a certain amount and repay the balance at end of the month – so it is like a loan because you are getting the money up front. However, you must be conscious about paying on time because the cost of going into your overdraft can be more expensive than a payday loan. Source: The Telegraph.
The Future of Payday Loans
For an instrument that has been in use for the past two hundred years, Payday loans have faced a radical series of transformations. From being completely unregulated to being a billion dollar industry, Payday loans have been subject to a lot of skepticism from critics.
Even though the industry is now heavily regulated through interest capping and other restrictive measures, there’s no denying the truth; Payday loans aren’t going away anytime soon. People need money, not for lavish spending, but to afford basic sustenance items. Often times, they may fall back on their payments and might not have the means or credit score to acquire a loan.
Banks may seem like a viable option on paper but the tight lending criteria, especially after the 2008 financial crisis, makes it very difficult for a middle income person to get a loan. As such, there will always be someone looking to garner profit by issuing short term loans with a higher risk.
With the advent of the internet, getting a loan has now become much more convenient as there are no extensive forms or documents that need to be produced. As mentioned previously, traditional payday loans are expected to be phased out completely within the next 5 years. But with online paydays, it has become harder for lenders to conduct background checks to assess the real default risk that they face. This is often cited as one of the reasons why premiums are rising for Payday loans.