Other Ways To Borrow


If you need to borrow money and are thinking of getting a payday loan, it’s important to consider your options. Although easy to set up, a payday loan can quickly turn into a problem debt for many people. It can also affect your credit rating if you don’t pay it back on time.

Borrowing to pay for essentials

You might be considering taking out a payday loan to pay for an unexpected essential cost, such as repairing your car or replacing a washing machine.

Payday loans are really only suitable for an advance before payday. If you’re going to have to take some time to repay the loan, it’s important to explore alternative forms of credit.

A payday loan is almost certainly not the answer if you need the money to:

  • regularly pay household bills
  • pay your rent or mortgage
  • pay back people you owe money to.

If you’re struggling to pay for the essentials, but you’re not yet missing payments, there might be ways to cover these costs.

If you’ve already missed payments on essential household bills, it’s important you speak to a debt adviser as soon as you can. They can help you work out a budget, prioritise your debts, talk to everyone you owe money to and help set up a repayment plan.

There are lots of organisations that can help with free, confidential debt advice.

Borrowing for non-essential spending

Payday loan companies might advertise payday loans for things like nights out, new clothes or other treats.

But if you do this, you’ll end up paying much more than if you waited and saved the money to pay for them. And if you just can’t wait, there are usually far cheaper ways to borrow. Here are some ideas to think about first.

Personal loans

Personal loans can charge reasonable rates of interest, depending on your credit score and other factors.

However, you might end up borrowing more than you need. This is because most lenders won’t offer loans of less than £1,000, which might be more than you need for a household purchase.

There will also be minimum repayment terms, which might not be suitable if you only want to borrow money for a short period of time. 

Buy now pay later

Most Buy Now Pay Later (BNPL) services allow you to buy things without paying for them upfront or during a promotional period, typically up to 12 months.

BNPL products have been used to spread payments on catalogue credit, store cards and finance at the point of sale.

Many online BNPL providers now offer you the option to spread the cost of shopping online, by either:

  • paying the full amount after an initial period, or
  • breaking down the amount owed into smaller interest-free payments that are repayable over several months.

That’s why it’s really important to keep track of:

  • how much you’ve paid
  • how much you still owe
  • your repayment dates.

Borrowing from family and friends

Borrowing emergency money from a family member or a friend can help you avoid the risks that go with payday loans.

But make sure that both you and the person you’re borrowing from take the time to:

  • put your agreement in writing
  • work out a budget and a repayment plan
  • discuss what will happen if you’re late paying it back or can’t repay it at all.

Using a credit card

If you’ve got a credit card, consider using it for purchases. But make sure you pay back as much as you can each month, to keep costs down. And don’t be tempted to spend more than you can comfortably afford to repay.

It’s not a good idea to use a credit card to withdraw cash because you’ll be paying interest from the day of the withdrawal, even if you pay the bill off in full. You might also be charged at a higher rate of interest than on purchases.

Using an authorised overdraft

If you have a current account, you might be able to apply for an overdraft from your bank.

These can be fairly expensive (although there are some interest-free overdrafts) – but it will usually be cheaper than using a payday loan.

If you go into an overdraft without your bank’s permission, they can choose to decline your payments and this could affect your credit rating.

Borrowing from a credit union

A more affordable alternative to a payday loan is a loan from a credit union. Credit unions are community organisations run by and for their members. 

They are regulated by the Prudential Regulatory Authority and the Financial Conduct Authority.

Credit unions operate with three main aims:

  • to provide loans at low rates of interest
  • to encourage all members to save regularly
  • to help members in need of financial advice and assistance.

Credit unions act in the interests of all members and so try to ensure they don’t let their members take out loans they cannot pay back by assessing their income and, in some cases, how much they’ve been able to save.

There’s a cap on the amount of interest they can charge – 3% a month or 42.6% a year APR for England, Scotland and Wales, 1% a month or 12.68% APR for Northern Ireland.

Help from your local welfare assistance scheme

Do you need help with heating, fuel or food bills, or have an emergency expense? Then you can see if your local authority has a local welfare scheme that can help.

Applications are assessed on a case-by-case basis and you have to be on a very low income or claiming certain benefits to qualify: