How to avoid using payday loans

Before taking out a payday loan, stop and consider the alternatives. Payday loans are rarely the answer to short-term debt and can even lead to bigger problems. 

girl on phone looking concerned

What are payday loans?

Also known as short term loans, payday loan companies offer you wads of money quickly on a short term basis, usually to tide you over until you’re paid.

The downside? The loans come with a huge amount of interest so even if you pay the loan back within the repayment period, you’ll still have to pay back way more than you borrowed. The longer you take paying back the loan, the more costs can spiral out of control.

What should I consider before using payday loans?

If you’re in a tough financial situation, having access to money simply and quickly sounds like a dream. The reality is there is no such thing as easy money.

Andrew Johnson, advice manager at Money Advice Service, says: “Although easy to access, a payday loan can quickly turn into a problem debt if not managed properly. It may also impact your credit rating even if you pay it back on time.”

A payday loan may be the wrong choice for you if:

  • You plan to use it to pay off other loans.
  • You don’t know where you’ll find the money to pay it back.
  • You already have another payday loan.
  • You don’t know if you can pay it back on time.
  • You’re taking out a loan to pay for unnecessary items such as new clothes or nights out.

OK, fine – where else can I get cash?

  • Borrow from someone you trust: Of course this all depends on whether your loved ones have cash to spare but if you want to avoid being in debt it’s the best place to start. To make it more official work out a repayment plan, discuss what to do if your payments are late and put your agreement in writing.
  • Ask for a pay advance from the Jobcentre: If you’re on benefits, you can ask your Jobcentre advisor for a short term advance which you’ll pay back through future payments.
  • Use a credit card: Ask your bank for a temporary increase on your credit card limit but make sure you pay it back at the end of the month.
  • Agree an overdraft with your bank: As long as it’s all agreed with your bank dipping into your overdraft can be an easy way to get cash without getting into too much debt.

I’m worried about my bills and rent help!

If you’re behind on your rent or have a tower of unpaid bills staring at you from your kitchen table, a payday loan definitely isn’t the best option. If you’re claiming benefits you can get help to pay for essentials such as rent, furniture or food by applying for a hardship payment or budgeting loan. Our article ‘I’m broke, what should I do?‘ has more information on what to do if you’re down to your last few pennies.

How can I stop this from happening in the first place?

We understand how easy it can be easy to slip into debt. Life can be tough. But have a read of Money for Life’s article on how to manage your money well and you may find some good tips.

Where else can I get help?

Call the Money for Life helpline on for support and information about any money worries: 0808 801 0666

  • Money advice service: You can get free and impartial money advice. They also have a webchat service and free helpline you can call on 0800 138 7777. Money Advice Service’s payday loan tool offers budgeting tips and advice on alternatives to payday loans.
  • Stepchange: Work out your debt repayment plans using Stepchange’s free online Debt Remedy tool. They also have a free helpline and a live chat advice service.
  • Citizens Advice: Contact your local Citizens Advice Bureau or get debt advice and information online.

More information

  • Citizens Advice Bureau offer free help with housing, money and legal problems. Find your local bureau.
  • StepChange has a free online tool called Debt Remedy, which can help make you a debt repayment plan. They also have a free helpline and a live chat advice service. Call on 0800 138 1111
  • The National Debt Helpline offers free, confidential and independent advice on debt issues. 0808 808 4000
  • Go to Money Advice Service for free and impartial money advice.
  • Call Money for Life's helpline for free on 0808 801 0666 to get the support you need on money, debt, benefits and more. Open 11am – 11pm every day.