Frequently Asked Questions

Only choose direct lenders who are authorised and regulated by the Financial Conduct Authority (FCA). All lenders, including payday loan lenders, are required to lend responsibly, ensuring that a loan is suitable for your circumstances and affordable. Using a short term loan direct lender who is regulated and licensed can mean greater protection for you.

However, even with the current UK regulation, there are still unauthorised, rogue lenders attempting to trap unsuspecting individuals.

Before applying for a loan, check:

• The lender is licensed to operate in the UK on the FCA register
• You have all the information you need
• The information you have is clear and easy to understand
• The lender is a responsible lender (they perform necessary checks to ensure the loan is suitable)
• You are applying using a broker or a direct lender (broker acts as a middle man and may provider your details to multiple lenders and providers)

Interest rates is the interest charged on the total amount of a loan. Usually this number is shown as an annual percentage. For example, if you borrow £1,000 for one year, and your interest rate is 12%, you will pay £120 in interest (12% of £1,000). That means you will pay £1,120 in total after a year. This excludes any additional fees, for example, arrangement fees or late payment charges.

APR (Annual Percentage Rate) is calculated as an annual or yearly interest rate. Short term loans and payday loans are paid back in a matter of weeks or months. As a result, calculating the APR on a short term loan can run into hundreds of per cent. The Financial Conduct Authority requires all loans to have the APR displayed and it is a helpful way of finding something in common to compare different loans on a like for like basis.

Another way of understanding the cost of a short term loan is to look at the daily interest charged (which should be no more than 0.8% or 80p a day per £100 borrowed). Lenders are also required to make clear the total cost of the loan (repayments plus interest).

These quick loans may seem a convenient way to borrow money, but the repayments can be costly. Make sure you understand how much you will need to pay back each month and that you can make repayments on time before applying.

Repayment term (or loan period) is the time over which you repay a loan to a lender. For example, short term loans are usually less than one year and personal loans are generally one to five years. During your loan period you will need to make regular repayments to the lender as agreed until the end date, by which your loan balance should be paid in full.

APR (Annual Percentage Rate) is the total cost of your borrowing for a year and it includes the fees and interest you’ll pay. The Financial Conduct Authority requires lenders to display the APR for all loans. Using the same, standard calculation helps make it easier to compare loans. Think of it as a way of comparing loans on a level playing field, on a like for like basis.

There are also other factors that matter when comparing short term loans. For example, it's helpful to look at the total amount you will need to repay each month, and the overall cost. Before applying for a short-term loan, make sure you feel comfortable with the monthly instalments, and they are realistic for your financial situation.

Failing to pay back money owed can have a serious impact on your credit score, which may affect your ability to get credit in the future.  If you fail to pay back a secure loan, you may lose the asset or assets you used as security for that loan.

If you think that you won’t be able to keep making payments to an existing loan, the first thing you should do is to get in touch with your lender as quickly as possible, preferably before a payment is missed. UK lenders are required to assist you with a realistic payment plan if you are struggling. Missing a payment may mean your details are passed to collection agents to call you and that could make the situation more stressful, so it’s better to contact your lender before defaulting.

If you are struggling to repay your debts, some charities and organisations may be able to help, such as Citizens Advice, Step Change, and The Money Advice Service. As with any financial difficulties, the sooner you act, the sooner you can get help.

Most eligibility requirements that apply to short term finance apply to other forms of credit too. Usually, you must:

• Be 18 or older and a UK resident
• Have a regular form of income (some minimums may apply)
• Have proof of address (often for the last three years)
• Have a UK bank account
• Provide your email address and a valid UK mobile phone number
• Not be bankrupt or have CCJ
• Pass affordability checks, credit checks and other checks a lender may perform

You may also be asked for additional information, including bank statements, and proof of employment.