Payday Loans and the Options Available

Warning: Late repayment can cause you serious money problems. For help, go to

How are payday loans different from instalment loans?

Payday loans are different in that they are often repayable over a short period, typically less than a month. The clue is in the title really, as they are designed to bridge you from one payday to the next. While some people choose to dip into their overdraft an alternative is to use a small short-term loan aka a payday loan instead. An instalment loan on the other hand amortises (fancy word for pays down) over a longer period, often several months or even years. These types of loan are for very different purposes such as buying a car or paying for a sofa. It's horses for courses really. If you need any independent help in deciding whether a payday loan is for you then why not visit

What are payday loans designed for?

Great question. Payday loans are there to give you a solution for your occasional short-term money needs. They are not suitable for supporting sustained borrowing over longer periods, nor if you are in financial difficulties. This is important. The cost of payday loans are often higher than other types of loans, such as those requiring you to provide a guarantor, which are payable over a longer period, so if you do require a longer term solution there are other more suitable forms of finance available elsewhere. As with all high cost short-term credit, late repayment can cause you serious money problems.

What is the difference between a lender and a broker of payday loans?

The direct lender means they have their name on the contract and it's their money transferred to your bank account. Over recent years there has been an explosion in the number of payday loan sites on the internet but on closer inspection they turn out to be firms operating as a broker. Brokers collect your data and then go out to the market and try to match you with a credit provider. Sometimes this crucial bit of information is buried deep on their website which is not really that helpful.

What's the difference between an online payday loan and one from a branch?

Payday loans or high cost short-term credit from a shop or from an online lender can often be the same. In this digital age where you can stream live TV to your phone it's not really that surprising that there is demand to apply for a loan through one! This isn't a shortcut or any less appropriate than going into a physical store, it's just different. Our habits are changing and we are demanding technology that can help us with our lives. Technology is not an end in itself, it needs to contribute otherwise it has no use.

What are the risks involved in payday loans?

There are implications for missing or not making a payment of a payday loan. Firstly, lenders often report loan information to credit reference agencies, missing payments could adversely affect your credit rating. This may make it more difficult or expensive to obtain credit in the future. Bear in mind also that payday loan firms may pass your account to a debt collection agency or commence legal proceedings to recover the amount you owe. Fees for failed collection may also apply. Make sure you check your loan contract very carefully for the implications of non-payment. If debt becomes a worry there are independent organisations you can ask for advice. Visit or for advice.