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5 FAQs About Payday Loans

When times are tight and our household finances are facing a serious squeeze, certain financial products like payday loans start to become increasingly attractive.

These loans are short-term borrowing options for smaller sums so they can be used to help bridge a gap in finances (1) as and when required. These loans are usually paid back in a lump sum after a couple of weeks or months, although instalment plans can be set up in some instances.

However, it’s important to note that while these loans may be easy to access and cover you in the short term, they are an expensive way to borrow because interest rates can be very high.

To help you work out if payday loans are the right course of action for you, here are some common FAQs about this borrowing option. If you’d like any further help or advice relating to payday loans debt advice, get in touch with us today.

Who can get a payday loan?

Payday loans are generally available for anyone over the age of 18. Approval will depend on credit history, affordability checks and other financial information. The lower your score, the less likely it is that you will be approved. While some firms do offer bad credit payday loans, you are likely to have to pay even higher interest fees, which could push you even further into financial difficulties.

Do payday loans affect my credit score?

Taking out a payday loan will not always affect your credit score as long as you repay it in full and on time. However, some companies could see these loans in a negative way, as it is a potential indication that you are a less reliable borrower.

Can I change my mind about a payday loan?

You are able to withdraw from a payday loan agreement within 14 days of taking it out, during the cooling-off period. You will need to repay the full amount borrowed, as well as any interest accrued during the period. Lenders will make you aware of your withdrawal rights when you take out a loan.

How can I avoid taking out a payday loan?

Devising a realistic budget that you can stick to each month is one way to go about ensuring you don’t need to consider payday loans as an option. If you find yourself facing unexpected costs, consider all other avenues first – and make sure that you talk to your existing lenders immediately if you’re struggling to make repayments.

Are there any risks with payday loans?

As well as the high interest rates associated with payday loans, other risks include fees for not repaying the amount on time or in full. You may also find yourself trapped in a cycle of debt, which can be very difficult to get out of.

Taking out a payday loan should not be a quick decision and if you’re already in debt or if you’re not completely sure that you’ll be able to pay it back, it could be advisable to consider other alternatives.

If you are struggling with debt at the moment because of cost of living challenges, get in touch with us today to see how we can help.



Money Helper has replaced the Money Advice Service and brings together the support and services of three government-backed financial guidance providers: the Money Advice Service, the Pensions Advisory Service and Pension Wise.