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Considering a payday loan? What are the alternatives

Payday loans can be a very expensive way to borrow money. Many people take out a payday loan because they struggle to get credit elsewhere. If you need to take out credit you should consider your alternatives.

If you've not got enough money to get by, taking out payday loans will only make your situation worse. The best solution is to get impartial debt help and a practical debt solution.

What are the alternatives to payday loans?

There are several alternatives to consider before you take out a payday loan:

  • Your local credit union: they provide straightforward and affordable financial products. Credit unions are likely to be far cheaper than payday loans.
  • Sell your unwanted items: have a clear out and turn these into cash
  • Cut back: reducing your spending might be enough to avoid the payday loan trap
  • Ask friends or family for help: if considered carefully a friends and family loan could save a lot of worry when trying to repay a payday loan
  • Get debt advice: if you're considering a payday loan to deal with an existing problem then you'd be much better getting some free and impartial debt advice from us
Credit unions

Credit unions are non-profit community-based organisations. They can offer loans, savings and current accounts for their members’ benefit.

People pay into the union to save or to borrow money if they need to. The idea is to encourage people to take control of their money, save what they can and borrow only what you they can afford to repay.

A credit union can be a way to access credit if you’re likely to be declined by the bank. Most credit unions lend small loans of £50 to £3,000. You can search for your local credit union on the Association of British Credit Union’s website, or call 0800 015 3060.

Budgeting loans

If you’ve been on working age benefits for at least 26 weeks you may be able to get a budgeting loan to pay for essentials like rent, furniture or clothes. The smallest amount you can borrow is £100 and normally you’ll have two years to repay it.

The money is paid straight into your bank account and is interest free. How much you get depends on your circumstances.

You can apply for a budgeting loan if you live in England, Wales or Scotland (PDF) and Northern Ireland(PDF).

Bank overdrafts

Rather than getting a payday loan it may be an option to ask the bank for a small bank overdraft. You’ll be charged interest on the amount you’ve borrowed until it’s repaid. There may be an administration charge, an arrangement fee, and monthly fees.

The overdraft can also be taken away at any time, so if you do have an overdraft it’s crucial for you think how you’re going to repay it, how much it’ll cost and be certain you won’t exceed the limit.

If you’re regularly short of money borrowing more won’t help. We can provide free debt advice.

Online payday loan help

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Do I need a payday loan?

Because of the high interest rates, payday loans should never be used for larger expenses like a holiday, home improvements or Christmas. Instead, can you save for this event over a few months? Can you cut non-essential spending? You can start by creating a budget.

You should never use a payday loan to pay off existing debts.

How else can I boost my budget?

Rather than take out high-interest debts you might want to look at other ways of improving your situation and boosting your budget. This includes: