A PayDay loan what is it?

A PayDay Loan is a high Interest cash advance on your wage/salary which is paid back when you receive your next pay packet/cheque. This is usually done by means of a post dated cheque or a debit/credit card. These loans can be had from High Street shops or via the Internet, they are short term loans for small amounts of money. A PayDay loan can be easy to get, but remember the Interest rate will be very high. There may be other, cheaper, ways to solve your immediate money problem. Check out the alternatives before committing to a PayDay loan. If you do decide to take a PayDay loan check out the different companies Interest rates and any other charges involved. Make sure that you understand the consequences of not being able to pay it back on time.

Paying back a PayDay loan, you will normally have one month to pay back your loan, plus any Interest. This will usually be by means of CPA, continuous payment authority, which allows the lender to take the money directly from your account, as you agreed when the loan was first taken out. If there is not enough money in your account on the day the repayment is due the lender will keep asking your bank for the monies owed, either all or part of the total. During this time there will be extra charges for late payment building up.

If you know that there will not be enough money to cover the repayment on the day it is due to be paid, you can instruct your bank or debit/credit card provider to not make the payment. This can only be done at least one day before the payment is due.

It may be possible to get a loan extension or deferral, whereby the lender gives you more time to pay, but this will come with extra Interest and they may also charge you fees for doing so. If you are having problems making your repayments on time then get some financial advice as soon as possible.

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PayDay loans are they regulated?

Yes they are regulated by the Consumer Credit Act 1974 and the lender may also belong to the CFA, Consumer Finance Association, or some other association with a code of practice they must adhere to.

All loan lenders need a credit licence, issued by the Office of Fair Trading. If they do not have such a licence it is against the Law for them to offer any loans. If you are offered a loan by anyone who is not licensed you can and should report them to Trading Standards.

The Consumer Credit Act 2006 requires the Office of Fair Trading to consider irresponsible lending in its assessment of whether or not a lender is fit to hold a licence.

Payday lending in the UK

A review of the debate and policy options by Damon Gibbons, Neha Malhotra, and Richard Bulmore