Payday loans

Payday loans offer a way of borrowing over the short term, to meet pressing bills that cannot wait.

The loans - also known as cash advance loans - are repaid in full on your payday by debit card so debts should not linger. Quick decision on loans from lenders followed by quick delivery also attract many borrowers, with applications for bank loans often taking over a week to turn into cash in the bank.

It is, however, important to remember payday loans are not a long-term solution to debt troubles, but a short-term answer to cashflow problems.

Consumers should look for payday loan lenders which take a responsible role and ensure borrowers who regularly turn to payday loans do not have longer term financial problems. Some providers, but not all, do not allow repeat monthly loans, while others may ask borrowers to reduce the size of loans each month.

Payday loan companies tend to charge high levels of interest, some times as high as 1,500 per cent APR – but the charges tend to be clear and the level of interest is fixed, whether the loan is for payday in four weeks' time or four days' time.

It is also worth noting that while the APR may be very high loans, the loans are never repaid over 12 months – unlike banks loans.

Rates differ across the payday loan sector but normal interest charges stand around £20 for every £80 borrowed – so £100 is repaid on an £80 loan.

To qualify for a payday loan it is usually necessary to have a UK bank account, be employed, and have a wage paid into the bank account. Lenders also demand a set minimum income.