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The Reality of Payday Loans

A man using a Payday Loans website.

A payday loan is a form of unsecured debt that usually comes with high interest and charges. They are typically taken out to be repaid in a short space of time.

These types of loans were designed to help people who are struggling in-between paydays, or people who need money for an unexpected reason such as to fix their broken car.

Most payday loans offer to pay out within 24 hours making them ideal for people in financial emergencies, however, they are not always the best option in the long term as they can sometimes be difficult to repay in full without being hit with interest and charges.

How do payday loans work?

In the early 2000s payday loans were much easier to be approved for than other loans. Short-term loans like these used to have fewer affordability checks which made them somewhat dangerous for people with low incomes.

However, in 2014 the Financial Conduct Authority (FCA) introduced a variety of new rules that protected people from being approved for payday loans they could not afford.

Therefore, currently, payday loans work the same as other loans:

  • Credit checks are completed by all lenders
  • Affordability checks are put into place
  • Interest rates and fees are capped
  • All borrowers must be made aware of any risks involved in taking out the loan

All of this means that payday loans are not as bad for the consumer as they used to be, but there are still many things people should be aware of before taking out payday loans…

Advantages and Disadvantages of Payday Loans

Like all financial products, payday loans come with their own set of pros and cons:


Affordability checks depend on more than just your credit score

Pay-out is often within 24 hours from approval

They can be convenient


Being rejected for a payday loan will harm your credit score

They are expensive

Having payday loans on your credit file may be unappealing to future creditors

Payday loans on your account can make it difficult to get a mortgage

Some lenders can access payments from your bank account through continuous payment authority

They can cause a debt cycle

Should I avoid payday loans?

Payday loans are acceptable as a one-off emergency. However, if you have previously taken out a payday loan or recently taken out any lines of credit, a payday loan is perhaps not the best option. Additionally, if you are already in debt or already on a debt management plan, you should avoid payday loans.

Get payday loan help

Here at DFH, we are determined to support people in repaying their payday loan debt.

If you are struggling with payday loan debt, we can advise you on what the most suitable debt solution for your circumstances.

Please click below to arrange a free consultation with our expert team.

Get Debt Help

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