Man Showing His Empty Pocket, No Money

Payday Loans: Quick Fix?

We’re all tempted, the adverts are everywhere, and it’s so quick and easy to get a payday loan, right? True enough, but the results can be a disaster…

Payday loans are the fastest growing form of borrowing for the 3.5 million people in the UK struggling to make ends meet between pay packets. Companies offering short-term loans are all over the press and TV and even on small ads run alongside free apps on iPads and mobile phones. They promise ready cash and a way to keep things ticking over, even for people with poor credit ratings. But unless you’re really good with money, payday loans can lead to spiralling debt.


“I took out a payday loan because I was a bit short . It was nearly the end of the month. I had heard about payday loans on the TV, so I took one out for £50 and paid it back quite quickly.” says one borrower Ashley (not her real name), who had to turn to CAP, a national debt charity helping people in crisis.

“A few months down the line when I was in a similar situation, I took a bigger loan for £250 from the same company. Each month they would send an email saying ‘either pay £87.50 to defer your loan or pay back the full amount’ so I only paid the interest.

“When I tried to pay the full amount back, I took out another loan with another company to cover bills but their interest was even worse. They would text saying: ‘Need more money? Text ‘OK’ to this number and get £100 in your bank instantly’. In the current climate that’s very appealing.

“The second company started taking the interest straight from my bank – nearly £300 each month. They said it was in the small print of the agreement. I think I still owe around £2000.”


Payday loan companies advertise using smiling actors or harmless-looking puppets that appear as trustworthy as your grandparents. This helps us ignore huge interest rates – even when advertised in big, bold numbers.

They make it sound so easy to take out a payday loan. And it is. Getting into debt is always easy. Because they are short-term, payday loans can seem very attractive. For people who struggle to get by however, the loans can be a trap because they need to be repaid while still living on that same budget. And worse, payday loans can often have hidden charges. There may be a charge to get the money the same day, and there will be definitely be penalties for non repayment which can be up to £150 for being just ten days late.

So if you’re a bit short, we recommend trying to find an alternative to payday loans, is there a friend or family member for example who can can help out and won’t charge you?


Trustworthy lenders will help you work out a budget you can stick to, so you know you can afford it. If you have a poor credit history and really need to borrow, credit unions may be able to help but they are still careful about lending:

“We’d like to offer short term loans to people needing help to tide them over until pay day, but we’d need to know people can get ahead again by next pay day,” explains James Berry, head honcho at Bristol Credit Union. “Assisting people with budgeting and debt advice is important too.”

Walthamstow MP Stella Creasy has called on the Government to tackle payday loan companies who she describes as ‘legal loan sharks’. She told Quids in! “High cost lending is causing misery for thousands. Many British households are struggling to make ends meet. This and a lack of regulation of this market by the Government, is being exploited by these legal loan sharks to push families further in to debt. One in three payday loans is taken out to pay off other payday loans. Other countries have a cap on the cost of credit which help prevent this spiral of debt – British consumers deserve the same protection.

There is now light at the end of the tunnel, for Ashley at least: “CAP took away the pressure, especially from all the phone calls. Without CAP I wouldn’t even have been able to pay off the interest, but now the money I pay comes off the actual loan. I feel relieved, peaceful and a lot less stressed.”

The payday loan industry is worth £2bn a year. It isn’t as ‘straight-talking’ as it claims to be, no matter how friendly it might seem.

Quids in! says:

If you’re tempted to take out a payday loan, think about why you need one. If it’s for bills or everyday items because you can’t stretch your income, you need long-term help and maybe some advice on budgeting, A payday loan might do more harm than good.

If it’s for a one-off emergency, make sure you can meet the repayments, otherwise the cost of that loan will only increase and push you further into debt.

It’s far better to put a little aside in a savings account for extras that will always come up when you’re not expecting them – even coins in a jar can soften the blow.

Need help? Our list of useful links and numbers is here.

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