If you need money to help you solve an unexpected financial emergency, you might think about applying for a payday loan.
While a payday loan could be a suitable solution, there are other options that you may wish to consider, such as a short-term loan.
CashLady is a credit broker, and we could help you search for a payday loan alternative, even if you have a history of bad credit.
The direct lenders we work with offer short-term personal loans from £100 to £10,000. Depending on the amount of money you apply to borrow, you could opt to repay your loan between 3 and 60 months.
What is a payday loan?
A payday loan is an amount of money borrowed from a lender, intended to plug a financial emergency between one payday and the next. Usually, a payday loan will need to be repaid in full, with interest, within a month.
Short-term loans: a payday loan alternative
A short-term loan works in the same way as a payday loan, in that funds borrowed from a lender are paid into your bank account and used to cover the cost of an emergency expense, such as a broken boiler.
However, the difference between a payday and short-term loan lies in the repayment terms.
Rather than needing to repay the money you’ve borrowed within a month, a short-term loan provides borrowers with a range of repayment terms to choose from.
Payday loan for bad credit
While you might be considering applying for a payday loan with bad credit, this may not be your only borrowing option.
If you’re looking for alternatives to payday loans, a short-term loan could be something to think about. If you’d prefer to spread the cost of borrowing rather than making your full repayment within a month, you might choose to do some research into short-term loans instead.
There are a number of UK direct lenders, including several on the CashLady panel, who specialise in short-term loans for people with bad credit.
If you have a history of bad credit, you should be aware that you could be offered a higher rate of interest. This could be the case for any type of loan, whether it’s payday or short-term.
No credit check payday loans
No credit check loans do not exist in any form, payday or otherwise.
Lenders who are authorised and regulated by the Financial Conduct Authority (FCA) must complete a full credit check, known as a creditworthiness assessment, on anybody who applies for credit.
A creditworthiness assessment gives the lender an idea of how likely you are to be able to afford your repayments.
While you might feel apprehensive about undergoing a creditworthiness assessment, especially if you have bad credit, it’s important to remember that being approved for a loan that you can’t afford could cause financial stress and a spiral of debt.
Will applying for a payday loan negatively affect my credit score?
As discussed, when you make an application for a payday loan – or any type of loan – the lender will carry out a creditworthiness assessment.
A creditworthiness assessment will include a hard search or Open Banking.*
A hard search will remain on your credit file for up to 12 months. Undergoing multiple hard searches in a short period will harm your credit score.
CashLady is a credit broker and could reduce the number of hard checks on your credit file by scanning a large panel of over 30 direct lenders in one search to help you find a suitable match.
Other ways a payday loan will affect your credit score
From payday and short-term loans to credit cards and mortgages, all credit products will affect your credit score.
If your loan repayments are made in full and on time each month, you may notice an improvement in your credit score. For this to happen, you’ll need to make sure that any existing credit commitments and bills are also kept on top of.
A late or missed repayment will have a negative effect on your credit score. Further down the page, we’ll explain what to do if you’ve taken out a loan and are worried about an upcoming repayment.
Choosing a payday loan direct lender
Whether applying for a payday or short-term loan with a direct lender, you should make sure that the company is authorised by the FCA. You can do this using the handy Firm Checker tool.
Companies or individuals that do not appear are unlikely to be following FCA guidelines. Sharing your information with an unauthorised company could put you at risk, and if something goes wrong, your money will not be protected.
We’re proud to say that all the lenders on the CashLady panel are authorised and regulated by the FCA and are committed to responsible lending.
When searching for the right credit broker or lender to help with your loan journey, you may wish to browse through customer reviews to get a feel of the service they provide. Company reviews can usually be found on Trustpilot or Feefo.
Who can apply for a payday loan?
Eligibility criteria will vary between lenders, but generally, you could apply for a loan if you:
- Are over the age of 18;
- Are a UK resident;
- Have a UK bank account; and
- Have a regular source of income paid into your bank account.
While none of the lenders on the CashLady panel offer payday loans, we could help you search for a short-term loan to suit your circumstances if you meet the above requirements.
When will the loan be sent to my bank?
If approved for a loan, the speed at which your money could be sent will vary between lenders.
Some of the lenders on the CashLady panel could send your short-term loan on the same day as your application is approved; however, this is not an indication of when the funds will appear in your bank account.
The time it takes for the money to become available in your account will depend on your bank’s policies and procedures.
What to do if you can’t afford to repay your loan
If you’re struggling to afford your loan repayments, you should speak to your lender.
Lenders have a duty of care to help customers in a financial crisis. While every lender is different, you could be offered a repayment holiday or reduced monthly repayments for a set amount of time.
If you need advice on money or debt, please reach out to any of the following organisations for free, impartial support:
CashLady is proud to have worked with charity StepChange to create the Money Health Check quiz. The quiz is free to take, and the answers you give will generate advice relating to your current financial situation.
*Open Banking is a secure procedure which, with your consent, enables your chosen lender to view your recent financial activity through online banking.
Assessing your recent spending and repayment habits could provide lenders with a better understanding of your affordability and how you typically handle money.
This could be especially useful for those who have bad credit history, as it presents a more up-to-date overview of your finances.
