Last updated: 4 November 2026. General information for the UK, not regulated financial advice.
There are still five days until payday, the car needs a repair, or the electricity is about to run out, and an advert pops up offering cash in your account in minutes. When you’re stressed and short of money, a payday loan can feel like the only option.
It usually isn’t. In this guide I’ll explain what payday loans really cost and share 10 payday loan alternatives in the UK, most of them much cheaper, and several completely interest-free.
It’s part of my debt and credit UK guide.
Need help now? If you’re borrowing to pay for food, rent or bills, please talk to a free debt adviser first: National Debtline 0808 808 4000 (England and Wales), StepChange 0800 138 1111. It’s free, confidential and they won’t judge you.
What does a payday loan really cost?
Payday loans, called high-cost short-term credit by the FCA, have a legal price cap. The FCA’s rules say:
- Interest and fees can’t be more than 0.8% a day of the amount borrowed.
- Default fees are capped at £15.
- You’ll never pay back more than double what you borrowed in total, including interest, fees and charges.
That cap stops the worst horror stories, but it’s still expensive. At 0.8% a day, borrowing £300 for 30 days could cost up to £72 in interest (£300 × 0.8% × 30). Repay late and it can grow to as much as £600 in total.
The bigger problem is that a payday loan doesn’t fix the shortfall. Next month, you have less money because you’re repaying the loan, and that’s how one loan becomes three.
10 payday loan alternatives in the UK
1. Ask the company you owe for more time
If the problem is a bill, call the company before you borrow. Energy suppliers, councils, landlords, phone companies and lenders can often agree a payment break, a reduced payment or a few extra days. This costs nothing. My guide to what to do if you can’t pay your bills this month has a simple script.
2. A Budgeting Advance (Universal Credit)
If you get Universal Credit, you may be able to get an interest-free Budgeting Advance for emergency household costs, such as replacing a cooker or getting a job.
GOV.UK says:
- You can get from £100 up to £348 if you’re single, £464 as a couple, or £812 if you have children.
- It’s usually paid back over 24 months from your Universal Credit payments (for example, £240 is repaid at £10 a month).
- You usually need to have been on Universal Credit, ESA or Pension Credit for 6 months, unless it’s to help you start or stay in work.
- You can’t get one if you earned more than £2,600 (£3,600 for couples) in the last 6 months.
Ask through your online journal or your work coach.
3. A Budgeting Loan (older benefits)
If you’ve been on certain older benefits, like Income Support, income-based JSA, income-related ESA or Pension Credit, for 6 months, you might get an interest-free Budgeting Loan of £100 to £812 from the government. You only pay back what you borrow, taken from your benefits. See GOV.UK: Budgeting Loans.
4. Council crisis support
Councils can help with essentials like food, energy, clothing and household items. In England, this comes from the Crisis and Resilience Fund, which replaced the Household Support Fund in April 2026. Help is often given as vouchers or goods, not loans, so there’s nothing to repay. Search “[your council] crisis support”. Scotland has the Scottish Welfare Fund and Wales has the Discretionary Assistance Fund. My free money help UK guide lists more.
5. A credit union loan
Credit unions are not-for-profit, community lenders owned by their members. StepChange says most lend between £50 and £3,000. The interest they can charge is capped by law and is usually far lower than a payday loan. Many will lend to people with a less-than-perfect credit history. Find yours through the Find Your Credit Union tool or ask your employer, as some credit unions work through workplaces.
6. A salary advance from your employer
Some employers let you take part of your pay early, either directly or through an app they’ve partnered with. StepChange notes that some are interest-free but may charge fees, so check the cost. Ask HR quietly; it’s more common than you’d think.
7. Your energy supplier’s hardship fund or support credit
If you’re on a prepayment meter and about to run out, ask your supplier for emergency or friendly credit, or extra support credit. Ofgem says suppliers must offer help if you’re struggling, and many have hardship funds and grants that don’t need to be repaid.
8. Sell something
It’s not a long-term fix, but selling one or two unwanted things can bridge a few days. Local Facebook groups are fast for furniture and bikes: I made £180 in one week selling things from our garage. See my guides to things to sell for cash and selling on Facebook groups.
9. An arranged overdraft (carefully)
An arranged overdraft is usually cheaper than a payday loan for a few days, but check your bank’s rate first: many charge high interest. Never go into an unarranged overdraft without asking. If you’re in your overdraft every month, that’s a sign to get advice.
10. Family or friends (with a plan)
Borrowing from someone you trust can be the cheapest option, but it can strain relationships. Agree an amount, a repayment date and put it in a text or note so nobody’s confused later.
And if you need food today
Food banks can help with emergency food. You usually need a referral from a GP, Citizens Advice, a school or your council, so ask any of them. There’s no shame in it; that’s what they’re there for.
Payday loans vs the alternatives
| Option | Cost | Speed | Who can get it |
|---|---|---|---|
| Payday loan | Up to 0.8% a day; never more than double | Very fast | Many people, even with poor credit |
| Asking for more time | Free | Same day | Anyone who asks |
| Budgeting Advance | Interest-free | Usually days | Universal Credit claimants who qualify |
| Budgeting Loan | Interest-free | Days to weeks | Some older benefit claimants |
| Council crisis support | Usually free (not a loan) | Varies | Depends on your council |
| Credit union | Low, capped by law | Days | Members (often local or workplace) |
| Salary advance | Often low or no interest; check fees | Fast | If your employer offers it |
| Arranged overdraft | Check your bank’s rate | Instant | If your bank agrees |
If payday loans have become a habit
If you’ve had several payday loans, or you’re borrowing to repay other loans, you’re not alone, and it’s fixable:
- Stop taking new loans if you can.
- Talk to a free debt adviser. They can help you make a plan and contact lenders for you. See free debt advice UK.
- Ask about Breathing Space (England and Wales): a free debt adviser can apply for a 60-day pause on most interest, charges and enforcement.
- Cancel the continuous payment authority if you need to protect money for priority bills. You can ask your bank to stop it. Speak to an adviser first so you understand what happens next.
- Build a small buffer, even £10 a week, so next month’s surprise doesn’t need a loan. My £1,000 emergency fund guide shows how.
Payday loan alternatives: people also ask
What can I do instead of a payday loan?
Ask the company you owe for more time, apply for a Budgeting Advance if you get Universal Credit, ask your council for crisis support, borrow from a credit union, or ask your employer about a salary advance. Free debt advice can help you choose.
Where can I borrow money with bad credit in the UK?
Credit unions often consider people with poor credit, and Budgeting Advances and Budgeting Loans are based on your benefits, not your credit score. Be very careful with high-cost lenders that target people with bad credit.
How much does a payday loan cost in the UK?
Interest and fees are capped at 0.8% a day, default fees at £15, and you’ll never repay more than double the amount you borrowed. Borrowing £300 for 30 days could cost up to £72.
Can I get an emergency loan from the government?
If you get Universal Credit, you may be able to get an interest-free Budgeting Advance of £100 to £812. Some people on older benefits can get a Budgeting Loan. Councils also offer crisis support that doesn’t need to be repaid.
Do payday loans affect your credit score?
Payday loans show on your credit file. Paying on time won’t necessarily help, because some lenders, especially mortgage lenders, view payday loan use as a warning sign. Late or missed payments will harm your score.
Is a credit union better than a payday loan?
Usually, yes. Credit unions are not-for-profit, their interest is capped by law, and they’re often more flexible with people who have a poor credit history.
Summary
- Payday loans are capped at 0.8% a day, but they’re still expensive and often lead to more borrowing.
- Try the free options first: ask for more time, Budgeting Advance, Budgeting Loan, council crisis support.
- Credit unions and salary advances are usually far cheaper ways to borrow.
- If you’re borrowing to cover essentials, get free debt advice.
Next step: if this keeps happening, list your debts and read how to get out of debt UK, or talk to a free debt adviser.
General information only. I’m not a debt adviser. If you’re struggling, please contact a free, confidential debt advice service such as MoneyHelper, StepChange or National Debtline.
Sources (checked 4 November 2026): FCA: price cap rules for payday lenders · GOV.UK: Budgeting Advance for unexpected costs · GOV.UK: Budgeting Loans · StepChange: considering a payday loan · Ofgem: help if you can’t afford your energy bills