When money runs short before payday, a high-cost loan isn’t the only option. Several cheaper routes are worth checking first.
Need to know
- Credit unions offer small loans with interest capped well below payday rates.
- If you get Universal Credit, you may be able to apply for an interest-free Budgeting Advance.
- Councils run local support schemes that can help with essentials in a crisis.
- Talking to the companies you owe, and getting free debt advice, can ease pressure without new borrowing.
If you’re thinking about a payday loan, it’s worth pausing to check these options first. Many cost less, and some cost nothing.
Options to check
| Option | Cost | Good for |
|---|---|---|
| Credit union loan | Capped at 3% a month in Great Britain | Small loans over months |
| Arranged overdraft | A single interest rate set by your bank | Very short gaps |
| Budgeting Advance | Interest-free, repaid from Universal Credit | Emergency or one-off costs |
| Local council support | Often free | Food, energy and essentials in a crisis |
| Employer salary advance | Varies; check any fees | Short gaps before payday |
| Family or friends | Usually interest-free | Small, short-term help |
Help with bills you already have
- Energy: suppliers must offer help if you’re struggling, such as payment plans or emergency credit on prepayment meters.
- Council tax: councils can agree a payment plan, and you may qualify for a council tax reduction.
- Rent: speak to your landlord early, and ask your council about Discretionary Housing Payments if you get housing benefits.
Helpful step
Before borrowing to pay a bill, call the company you owe. A short payment plan with them is often cheaper than a loan to pay them on time.
Free, impartial advice
MoneyHelper, StepChange, National Debtline and Citizens Advice all offer free, confidential help. In England and Wales, a debt adviser can also apply for Breathing Space, which pauses most interest, charges and enforcement for 60 days.
Important
Avoid unlicensed lenders and anyone who asks for an upfront fee before giving you a loan. Check every lender on the Financial Conduct Authority’s register.
Choosing the right route
For a one-off cost you can repay within weeks, a credit union loan or arranged overdraft is usually cheaper than payday credit. If shortfalls happen most months, free debt advice will help more than any loan. If you do decide on a payday loan, read our guides to how they work and the price cap first.
Your questions answered
Is an overdraft cheaper than a payday loan?
Usually, for short periods. Since 2020, banks charge a single interest rate on arranged overdrafts. Check your bank’s rate and use it only for short gaps.
Can my employer help?
Some employers offer salary advances or hardship funds. Check any fees and how repayment would affect your next pay.
What if I’m offered a loan by someone who isn’t authorised?
Don’t take it. Unlicensed lenders, or loan sharks, operate illegally and can be dangerous. Report them to your local Stop Loan Sharks team or illegal money lending team.
This guide is general information, not financial advice. Late repayment can cause you serious money problems. For help, go to moneyhelper.org.uk. We don’t arrange loans or work with lenders. Before borrowing, check the lender is authorised on the FCA register, and consider free debt advice from MoneyHelper, StepChange, National Debtline or Citizens Advice.