The information we provide differs between countries. To get information for your country, please select from the dropdown.
Pay day loans
This information applies to England, Wales, Scotland and Northern Ireland
About pay day loans
A pay day loan is a short term loan intended to tide you over until you get paid. Many cheque cashers offer this service. Cheque cashers are companies where you can take a cheque and exchange it for money. You will be charged a fee for this service.
How pay day loans work
To get a pay day loan you must:
- be over 18
- have a bank account
- be in full time employment.
You write out a personal cheque to the cheque casher and they give you cash for it. They will deduct a fee which will usually be quite high. On pay day, the cheque casher will present the cheque you have written to your bank. It’s up to you to make sure there’s enough money in your bank account to pay it.
You can also get pay day loans online using a bank debit card.
Pay day loans are an expensive way to help people over temporary problems and are not suitable for longer term difficulties. If you have a bank account, you may be able to agree an overdraft instead but be careful of going overdrawn without permission. If you do decide to use a pay day loan, make sure you know about all the costs and charges first.
For more information about going overdrawn, see Bank overdrafts.
If you need to use pay day loans regularly you may like to get help with budgeting or dealing with debts, for example, at a Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by e-mail, click nearest CAB.
What happens if the cheque bounces
If the cheque bounces, the cheque casher will charge you a fee and may be able to take court action to recover their money. The bank will also charge you a fee for bouncing the cheque.
Sometimes you can delay repayment by agreement with the cheque casher but you will have to pay a further fee.
Making a complaint about pay day loans
If you have problem with a pay day loan, you should contact the lender and try to sort things out. If you are still not satisfied, and the lender is a member of a trade association such as the British Cheque & Credit Association (BCCA) or the Consumer Finance Association (CFA), you can make a complaint to them. The BCCA is a trade association for companies which provide pay day loans and cheque cashing services. The CFA represents companies making short-term unsecured loans, such as payday loans. Both associations have a consumer code of practice which members must follow. You can check whether the lender is a member and get more information about the BCCA code of practice from the BCCA website at www.bcca.co.uk. and you can check whether they are a member of the CFA at www.cfa-uk.co.uk.
If the lender is not a member of a trade association, or you are still not satisfied, you can make a complaint to the Financial Ombudsman Service (FOS). You can get information about making a complaint on the FOS website at www.financial-ombudsman.org.uk.
Further help and information
On Adviceguide
For more information about different ways of borrowing money and getting credit including dealing with loan sharks, see Types of borrowing.
You may also find the following Adviceguide information helpful:
- Getting the best credit deal
- Credit cards
- Credit
- Banks and building societies
- Increasing your income
- How to spend less
- Help with debt in England, Wales and Northern Ireland
- Help with debt in Scotland.
The Money Advice Service
The Money Advice Service is a free, independent service. Their website (www.moneyadviceservice.org.uk) has lots of useful information about borrowing and managing your money.
Go to their website for more information about:
British Cheque & Credit Association (BCCA)
Consumer Finance Association (CFA)
Financial Ombudsman Service (FOS)
www.financial-ombudsman.org.uk.
Payplan
The organisation Payplan has produced a guide to payday loans which is available on their website at www.payplan.com.
