Key takeaways

• Payday loans are usually the most expensive way to borrow a small amount. In an illustrative example on a £1,000 balance, one month's interest at the FCA's maximum payday rate comes to £240, compared with around £29 on a credit card for people with lower scores.

• Government help may be available before you borrow commercially, including a Budgeting Advance if you get Universal Credit, a Budgeting Loan on some other benefits, and crisis support from your council.

• A credit union loan, an arranged overdraft, a salary advance from your employer, or a 0% purchase credit card is usually cheaper than a payday loan, subject to eligibility.

• Emergency borrowing tends to stick. 71% of ClearScore users with emergency lending in January 2025 were still using it a year later.

• If you do take a payday loan, the FCA caps interest and fees at 0.8% a day and the total cost at 100% of the amount borrowed, so you'll never repay more than double.

What are the alternatives to a payday loan?

The main alternatives to a payday loan are help from the government or your council, borrowing from family, a salary advance from your employer, a credit union loan, an arranged overdraft, a 0% purchase credit card, and a small personal loan. That's roughly in order from cheapest to most expensive.

Which one is cheapest for you depends on what you're eligible for and how quickly you need the money. Some options take a day or two to arrange, while a payday loan can pay out the same day, which is a large part of its appeal. The sections below run through each option in order, so you can rule them in or out quickly. All of this is general information, subject to individual circumstances and lender criteria.

Why is a payday loan usually the most expensive option?

Because of the daily interest rate. The Financial Conduct Authority (FCA) caps payday loan interest and fees at 0.8% a day of the amount borrowed, fees for missing a payment at £15, and the total cost at 100% of the loan, so you can never repay more than twice what you borrowed. Those caps have applied since January 2015 (FCA price cap).

0.8% a day sounds small. Over a month it isn't. The chart below shows one month's interest on a £1,000 balance across four borrowing options that people with lower scores commonly use. In this example, the payday loan costs around eight times as much as the credit card. Our guide to payday loan costs breaks the figures down further.

Illustrative worked calculation, not ClearScore user data. Figures are illustrative only — actual rates and the cheapest option available will vary by individual circumstances.

How the figures are worked out: each bar shows 30 days' interest on a £1,000 balance at a single illustrative rate, with no fees and nothing repaid during the month. The payday figure uses the FCA's maximum of 0.8% a day, so it shows the most a payday lender can charge in interest over that period, not a typical cost. The credit card figure uses an illustrative rate for people with lower credit scores. Actual costs depend on the lender, the rate, any fees and how quickly you repay.

Here's how the main options compare on cost, speed, and who can usually get them.

Rates are typical ranges, not quotes. The actual cost depends on the provider and your circumstances. Always make sure you can afford repayments.

Can you get government help before you borrow?

Possibly, depending on your circumstances. It's worth checking before you take on any commercial borrowing, because this help is either interest-free or doesn't need repaying at all.

• Budgeting Advance – if you get Universal Credit, you can apply for an advance to cover unexpected costs. You usually need to have been getting Universal Credit or certain other income-related benefits for six months or more, unless the money is to help you start or stay in work, and other conditions apply. It's repaid through your future Universal Credit payments.

• Budgeting Loan – an interest-free loan for people who've been getting Income Support, income-based Jobseeker's Allowance, income-related Employment and Support Allowance, or Pension Credit for at least six months. Repayments come straight out of your benefits (Budgeting Loans).

• Crisis support from your council – in England, the Household Support Fund ended on 31 March 2026 and councils now run the Crisis and Resilience Fund, which launched on 1 April 2026. Each council sets its own rules, and help is often a grant or voucher rather than a loan. Scotland, Wales, and Northern Ireland have their own schemes: the Scottish Welfare Fund, the Discretionary Assistance Fund and Discretionary Support.

• Help from the company you owe – if the emergency is a bill, energy and water suppliers have hardship schemes and payment plans. Asking before you miss a payment usually gives you more options.

• Free debt advice – if money is tight more often than not, a free adviser can go through all of this with you. Read our guide to free debt advice.

Can your employer help with a salary advance?

Some employers will advance part of your wages before payday, either informally through payroll or through an earned wage access scheme, which is an app that lets you draw some of the pay you've already earned before payday. Advances arranged directly with your employer are often free. Third-party apps may charge a fee each time you draw money down, so check what it costs before you use one.

One thing to plan for: an advance isn't extra money. Your next pay packet will be smaller by the amount you took, so it works best for a one-off gap rather than a regular shortfall.

Are credit unions a cheaper way to borrow?

Usually, yes. Credit unions are member-owned lenders, and in Great Britain the interest they can charge is capped by law at 3% a month, which is 42.6% APR (credit union loans). That's a ceiling, not the typical rate. Credit unions often lend smaller amounts than banks, and some will consider members with lower credit scores.

To borrow, you need to join first, which usually means sharing a 'common bond' with other members, such as living in the same area or working for the same employer. Some credit unions ask you to save for a short period before you can borrow, so this option works best if you can wait a few days or already belong to one.

Is an overdraft cheaper than a payday loan?

An arranged overdraft is usually cheaper than a payday loan for a short period, but it isn't free. Since April 2020, banks can only charge a single annual interest rate on overdrafts and can no longer add fixed daily or monthly fees, which makes the cost easier to compare with a credit card or loan (overdraft rules).

If you don't already have an arranged overdraft, you can ask your bank for one, or for a temporary increase. Going overdrawn without an arrangement is best avoided: your bank may refuse payments, and it can show on your credit report. Our guide explains how an overdraft affects your credit score.

Could a credit card or a small loan work instead?

0% purchase credit cards

A 0% purchase card charges no interest on eligible purchases for a set period, as long as you meet the offer's conditions, such as making at least the minimum payment each month. Fees may still apply, cash withdrawals and some other transactions are usually charged differently, and any balance left when the offer ends is charged at the card's standard rate, so it's worth checking the card's terms. You'll need to apply and pass a credit check, so it's rarely a same-day option, and if you miss a payment the 0% offer can be withdrawn. Read our guide to 0% purchase cards for how they work in more detail.

Small personal loans

A small personal loan spreads the cost over a longer term at a fixed rate. Smaller loans usually carry higher rates than larger ones, and the rate you're offered depends on your credit profile. If your score is lower, a personal loan won't always be cheaper than a card, so compare the total cost over the full term rather than the headline rate. Our guide to a good loan rate explains how, and if you have a lower credit score there's a separate guide to your options.

Whichever you're considering, many lenders let you check your eligibility first using a soft search, which doesn't affect your credit score. Our guide explains the difference between hard and soft searches.

What about borrowing from family or friends?

Often the cheapest option of all, and the one most likely to cause problems if it goes wrong. If someone offers to help, write down how much you're borrowing, when you'll repay it and what happens if you can't. Treating it like a real loan protects the relationship as much as the money.

What happens if you take a payday loan anyway?

Sometimes a payday loan is the only option that pays out in time. If that's where you are, it isn't the end of the world, but it's worth knowing that emergency borrowing tends to stick.

ClearScore data shows that 71% of users who had emergency lending in January 2025 were still using it a year later. Only 29% had stopped.

Source: ClearScore data, more than 400,000 UK users, tracked January 2025 to January 2026. Emergency lending defined as Short Term Credit, Home Lender, and Open Banking-detected payday transactions — overdraft excluded.

Three things to hold on to if you do borrow this way. The FCA cap means you'll never repay more than double what you borrowed. Repaying on time matters, and our guide explains how payday loans can affect your score. And free, confidential debt advice is there if the repayments get difficult.

At ClearScore, we don't think a payday loan on your report defines you. Your score is a snapshot of where you are now, not where you'll always be, and you can check the options above again next time, although availability, eligibility and costs can change.

How can you avoid needing emergency credit next time?

• A small emergency fund – even £10 a week can build up over time, and an affordable buffer may help cover some one-off costs that push people towards payday loans, although it won't cover every emergency.

• Check what you're entitled to – a benefits calculator and your council's website show what help exists before you need it.

• Know your overdraft limit – since April 2020, banks can't charge a higher rate for unarranged borrowing than for arranged borrowing, but costs depend on the bank and the account. Going over your limit without an arrangement can also mean refused payments, possible refused-payment fees and a mark on your credit report.

• Check your credit report – checking your score and report may help you understand your credit profile before an emergency, although what's available depends on lenders' criteria and affordability checks, and whether anything on your report needs fixing.

Check your credit score for free with ClearScore

ClearScore shows you your Equifax credit score and report for free, forever, updated every week. Seeing your report before you need to borrow helps you understand which options may be available to you, and whether there's anything on it worth putting right first. Credit reference agencies such as Equifax, Experian and TransUnion collect and provide credit information, scores can differ between agencies, and lenders use their own criteria and scoring, so their assessment can differ from the score shown by a credit reference agency. Check your score with ClearScore.

ClearScore is a credit broker, not a lender. 18+, registration required, T&Cs apply.

Frequently asked questions

Are payday loans bad?

They're expensive rather than bad. A payday loan is a regulated product with a legal cap on what it can cost, and for some people it's the only option that pays out in time. The cap limits what you can be charged, but missing repayments can still damage your credit record and lead to debt collection. The daily interest also adds up quickly, and emergency borrowing often continues once it starts, so it's worth trying the cheaper routes in this guide first.

Do payday loans affect your credit score?

They can. A payday loan appears on your credit report like any other credit agreement, and some lenders may view recent payday borrowing cautiously. Repaying on time matters most. Our guide on payday loans and credit scores goes into the detail.

Can I get an emergency loan on benefits?

If you get Universal Credit, a Budgeting Advance is usually the first thing to check, and a Budgeting Loan if you've been on certain other benefits for six months or more. Credit unions may also lend to members on benefits. Both routes are usually far cheaper than a payday loan. If you're wondering whether claiming affects your score, read our guide on Universal Credit and credit scores.

Can I borrow money with a lower credit score without a payday loan?

Often, yes. Credit unions, an arranged overdraft with your existing bank, and an employer advance don't always depend on a strong score. If you need a larger amount, our guide to borrowing with a lower credit score covers the longer-term options.

Is a guarantor loan cheaper than a payday loan?

Usually, but it carries a different risk. A guarantor loan tends to have a lower rate because someone else agrees to repay it if you can't. That means missed payments can affect their finances, and their credit report if they can't cover them, as well as yours, so it's a decision for both of you.

What is the FCA payday loan cap?

Since January 2015, payday lenders in the UK can't charge more than 0.8% a day in interest and fees, default fees are capped at £15, and the total cost of a loan can't exceed 100% of the amount borrowed. In practice, you'll never repay more than twice what you took out. The cap limits the cost, but missed payments can still damage your credit record and lead to debt collection.

Where can I get free help if I can't pay my bills?

MoneyHelper, StepChange, Citizens Advice, and National Debtline all offer free, confidential advice. They can help you prioritise bills, talk to the companies you owe, and check whether you're entitled to any support.

Important information

This article provides general information only and does not constitute financial advice. It is not a substitute for advice from a lawyer, financial adviser or other appropriate professional. Individual circumstances vary, and you may wish to seek independent advice before making financial decisions. Information is accurate at the time of writing and may change.

Always make sure you can afford repayments.