Things to Consider Before Choosing Your Payday Lender

From hidden fees to unwanted stress, choosing the right payday lender can help you avoid both the financial and psychological costs of borrowing money.

Search for information about payday loans and you’ll find a variety of lenders, ranging from tiny companies to well-known brands. As a borrower, what steps can you take to separate the good lenders from companies that might not offer the best deal?

Below, we’ve listed five things to consider before choosing your payday lender, all of which can help you avoid unfair deals, expensive loans and other sources of stress.

Check that the lender is FCA authorised

The Financial Conduct Authority, or FCA, regulates lending and other financial activity by firms based in the UK. If a lender appears on the FCA register, it’s a good sign that they play by the rules and offer loans that comply with UK lending laws, regulations and guidelines.

You can search the FCA register here to check if a lender is authorised. When a lender doesn’t appear in the FCA register, it’s best to think very carefully about entering into a loan agreement with them.

Verify their name, address and phone number

Another easy way to check that a lender is legitimate and trustworthy is to check their trading name, address and phone number.

If you find a lender online that’s located close to you, you can visit their nearest location to talk to them in person. For lenders based further away, you can enter their address into the search bar in Google Maps to verify that they’re based where they say they are.

Got questions? Call and ask for assistance

Reliable payday lenders understand that informed borrowers are the key to a successful lending business. As such, they’re happy to offer assistance in the event that you call and ask for more information about a loan.

If you have any questions or uncertainties about a lender, feel free to call them and ask for extra information. A good lender shouldn’t have a problem telling you about their fees, terms, interest rates and other loan-related questions.

Check interest rates, fees and total repayable amounts

If you’re considering several payday lenders, it’s important to compare the total cost of a loan from each company. This means looking at everything from the interest rates to late fees and other “hidden” costs that can make a loan more expensive than it initially looks.

Reliable lenders will make the true cost of borrowing clear to you right from the beginning of the process. Look for a “total repayable” or “total amount repayable” figure when you compare loans to make sure you’re fully aware of the complete amount you’ll need to repay over time.

Look at awards, reviews and certificates

Finally, you should always look at reviews and other borrower feedback before entering into a payday loan agreement. This gives you an understanding of what it’s like to work with a lender from the perspective of real, experienced borrowers.

It’s also worth looking at other indicators of reliability and trust, such as memberships in trade associations and other industry groups. In the UK, reliable lenders will often belong to the CFA (Consumer Finance Association) and CCTA (Consumer Credit Trade Association).