Table of Contents
Christmas is officially just around the corner, and there’s lots of things to love about it. The good food, festive cheer, trips to see family, and of course, the presents. As millions of people all around the UK know though, all these things can take their toll on family finances. For example, the Bank of England reports that UK households spend nearly 30% more in December than in a typical month, so it’s hardly surprising that in the run-up to Christmas, money is on everyone’s mind.
That’s where we can help here at PennyPlan. With our extensive expertise, we find proactive solutions (wherever possible) to help provide UK families with more financial security and peace of mind in difficult circumstances.
Now, in light of the increased financial pressure associated with the festive season, it’s not unusual for people to turn to payday lenders. This can often be a useful short-term solution, but if it’s one you’re considering yourself, it’s really important to make sure you’re fully clued-up on all the important stuff going in. So with that in mind, we’ve put together our own quick roundup of the UK’s most popular payday lenders. First though, some quick terms you need to know!
- Direct lender: a company or financial institution that lends money straight to a borrower without going through a broker or intermediary.
- Unsecured loan: money that a lender gives to a borrower without requiring “collateral”.
- Collateral: valuable assets – such as a car, savings, or a home – that a lender may take possession of, if the borrower fails to repay.
- Interest rate: the percentage that a lender charges a borrower on the money they’ve borrowed. This is usually expressed as an annual percentage.
- Line of credit: a borrowing limit that a lender gives to a borrower. The borrower takes money from it when needed. Unlike a traditional loan, the borrower can draw, repay, and redraw from the line multiple times within the approved limit.
- Credit score – a numerical rating, usually between 300 and 850, that a credit bureau gives to track a borrower’s “creditworthiness” – in other words, how reliably a borrower has repaid money in the past, based on their credit history. Lenders use this number to assess the risk of lending.
- Debt escalation – refers to a scenario in which a borrower’s debt grows over time. This is often due to additional interest charges, fees and missed payment penalties being added to the balance, typically levied by lenders.
Drafty
- Business type: Direct lender
- Offering: Flexible line of credit
- Credit checks and affordability assessments? Yes
- FCA approved? Yes
- Manage your accounts through: Website and app
In more depth:
Drafty markets itself as providing an alternative to traditionally high-interest payday loans, instead offering a flexible line of credit that can be anywhere between £50 to £3000. It does also offer unsecured personal loans from £1000 to £3000, with repayment terms of between 12 to 24 months.
Drafty considers customers with bad credit, but is careful with its due diligence; all loans and credit limits are subject to affordability checks, to avoid the risk of lending more than a customer can afford to pay back. If the loan is approved though, it sends the money to the borrower’s bank within 90 seconds. Notably, Drafty only charges interest on the borrowed amount, rather than the total credit limit. (These interest rates vary depending on each borrower’s individual credit rating.)
Flexibility is one of the key principles of its general approach. Rather than requiring customers to repay the loan on their next payday, Drafty instead allows early repayment at any time, which can actually reduce the overall interest costs. Borrowers can manage their accounts directly through the website or mobile app, where they can view their balance, make payments, and access support. What’s more, its “revolving credit option” enables borrowers to re-use the funds once they’ve been repaid, so there’s no need to apply again.
However, even with the support available, as with all forms of high-cost credit, there’s still the risk of debt escalation if repayments are missed. And while its rates are lower than many payday lenders, it still remains notably higher than standard credit cards or personal loans.
Little Loans
- Business type: Credit broker
- Offering: Matches borrowers with suitable short-term lenders
- Credit checks and affordability assessments? Yes
- FCA approved? Yes
- Manage your accounts through: Website only (for application) and lender’s platform
In more depth:
The first thing to note about Little Loans is that it’s not a direct lender, but a credit broker. Its stated mission is to help connect customers with the most suitable provider of a short-term loan, according to each borrower’s specific circumstances. Little Loans has access to a network of over 30 direct lenders, offering loans anywhere between £100 to £10,000. The service is free to use, and has no impact on the borrower’s credit score. (It also considers borrowers with bad credit.)
Little Loans aims to streamline the sometimes notoriously complex application process with a single form instead. It then uses the information on that form to identify the members of their network most likely to be best-suited to its terms. The borrower then takes their pick of the viable lenders. Once the match is finalised, the lender then proceeds with their own checks, including full credit checks and affordability assessments, and everything proceeds from there.
It’s worth noting even though Little Loans strives towards making the entire process less complex and stressful, it still emphasises that borrowers will need to do their own research into the lenders they might be considering, as the ultimate responsibility lies with them in terms of repayment.
CreditSpring
- Business type: Direct lender
- Offering: Subscription-based interest-free loans
- Credit checks and affordability assessments? Yes
- FCA approved? Yes
- Manage your accounts through: Website / dashboard
In more depth:
CreditSpring’s service is slightly different to that of most payday lenders, in that it offers a subscription-based credit model that’s designed to provide borrowers with short-term financial support, with fixed predictable costs. How it works is this: borrowers pay a monthly fee, and in return they’ll get access to interest-free loans that can be drawn twice a year. These loans can typically be up to £1000 in total, to be repaid over several months in fixed instalments. If you like, it’s essentially borrowing as a membership service.
It’s an arrangement that often appeals to people who want the peace of mind of a financial safety net, without the unpredictability of revolving credit. What’s more, CreditSpring customers also frequently benefit from its financial education tools and credit score monitoring.
Naturally, like all responsible direct lenders, CreditSpring maintains a firm set of eligibility criteria for its customers. For example, borrowers need to be UK residents, have a stable income, and a certain minimum credit score to be able to use the service.
Cash ASAP
- Business type: Direct lender
- Offering: Offering short-term payday and instalment loans
- Credit checks and affordability assessments? Yes
- FCA approved? Yes
- Manage your accounts through: Website only
In more depth:
CashASAP does exactly what it says on the tin; it provides small unsecured same-day loans that can help bridge the gap between paydays.
The lender provides two types of loans:
a payday loan that’s repayable in a single payment
a Multi Month Loan that instead can be repaid in three-monthly or six-monthly instalments
The loans themselves can be anywhere from £100 to £1000, with repayment terms from one to six months. Borrowers can complete a quick application online, which can then be approved in minutes. Following that, the funds generally get deposited on the same day. The service is primarily geared towards employed adults who find themselves dealing with temporary financial gaps between paydays.
CashASAP prides itself on its transparent loan terms, and there are no hidden fees to contend with. However, as with many direct lenders, the interest rates can be fairly high, and the onus is on borrowers to make sure they hit the agreed repayment dates – otherwise it may further complicate their financial situation. Customers can manage their accounts digitally through the website, where they have the option to repay their loans earlier, reducing their interest charges in the process.
QuidMarket
- Business type: Direct lender
- Offering: Short-term instalment loans
- Credit checks and affordability assessments? Yes
- FCA approved? Yes
- Manage your accounts through: Website only
In more depth:
Similar to CashASAP, QuidMarket provides unsecured loans that are mainly designed to help borrowers uncover short-term expenses, such as unexpected financial emergencies; for example, repairs to a car or van that might be vital to someone’s job. As with several other direct lenders we’ve covered already, QuidMarket is committed to being credit-inclusive, so it does consider families with poor credit.
QuidMarket’s loans are ‘instalment loans’ that the company positions as being a responsible alternative to payday loans. These can range from £300 to £1500, repayable over 3 to 6 months, with fixed interest rates. The company also offers flexible repayment terms (though they’re dependent on credit and affordability checks) so customers can make extra payments or repay early to save on interest.
There are also budgeting tools and financial resources to help people engage in informed borrowing. That ties into QuidMarket’s overall mission – it wants to maintain long-term relationships with repeat customers by rewarding timely repayments with potential access to higher credit limits.
Need financial assistance? We’re here to help
If you’re experiencing difficulty with your own financial situation – that’s exactly where our advisors come in here at PennyPlan. Our expertise means that we can provide advice on a range of debt solutions, including IVAs, Debt Management Plans, and Debt Relief Orders. Whatever the nature of your circumstances, you can count on us to help you find the most suitable solution for your situation, giving you as much financial security, flexibility and peace of mind as we can. Our advice is free and confidential – so don’t hesitate to speak to one of our team today.
