pay day loans for bad credit

How Do Payday Loans Affect Borrowers?

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There are many different types of Poor Credit Personal Loans for UK residents, the most popular of which as measured by new accounts created per annum is the Payday Loan. The number of Payday Loans for Poor Credit UK applicants made every year has however actually fallen from its previous peak in 2013 as many lenders have realised that borrowers prefer a bit longer to pay back any loan they’ve taken out.

Despite this shift in borrowers’ behaviour, the payday loan is still a very popular form of finance and, in this article, the Oyster Loan team answer some of the most common questions, including:

What is a Payday Loan?

A Payday Loan is a short-term financial product designed to help borrowers out when they encounter a short term personal cash flow problem – like an unexpected car repair bill or funeral expenses.

When you apply for a Payday Loan, most, but not all, lenders will either make you an offer within minutes of applying for financial help or they will turn you down. If they accept, you agree with the lender that you will pay the value of the loan back plus the interest on one particular day within 30-35 days of receiving the money. For most people, they nominate their next payday as the day on which they wish to repay back the loan and the interest in full.

And that’s how why these types of loans, otherwise known as single payment high-cost short term credit loans, are known as “Payday Loans.”

Who can apply for a Payday Loan?

Anyone aged 18 or over but the fact that you are 18 years or older does not mean that you’ll be accepted for a payday loan.

Why? There are two reasons – the details you fill out on an application form for a loan and your credit report. A credit report is a personal file compiled on you and how you handle money – there are three main companies which build these credit reports or files and they are called Experian, Equifax, and CallCredit.

These companies record lots of different bits of information about you including how many loans and credit cards you have, what the balances and limits are on those loans and credit cards, your address history, and much more. From all this information, they come up with a “credit score” which they provide payday loan lenders with when you apply for one.

Each payday loan lender has a different “borrower profile” they like a borrower to be as close as possible to when someone applies directly to them for a loan. If your credit score is too low for them, they will reject your application.

Likewise, with the personal and financial details, you provide a lender with when you apply to them directly. Lenders only generally work with borrowers where the information a borrower provides them with during the application process is near to their preferred “borrower profile”.

As you can see, your chances of getting a Payday Loan rest on whether you’re the type of person whose financial situation and history is closest to the types of people described in their “borrower profile”.

How do Payday Loans affect my credit status?

If you take out a Payday Loan and you repay it in full on the date you agreed with your lender, your “credit score” will not be affected – in some cases, it might actually be enhanced.

That’s not always the case though. Many lenders do look past the credit score to look for other types of information including whether you have taken out a Payday Loan before, whether you gamble often, and so on.

The important thing to remember is that as long as you apply to a lender whose “borrower profile” you closely match, the better chance you have of getting a “yes”. So, how do you find out what a lender’s borrower profile? That’s a big problem and we’ll talk about it later on in this article.

Are Payday Loans difficult to repay?

Before you accept a Payday Loan deal, you should always double- and triple-check that you are certain that you can make the repayment of the loan and the interest in full on the date you agree with your lender.

Many people do find Payday Loans difficult to pay back because of the size of them – that’s why many borrowers are turning to instalment credit loans stretched up to over 12 months. Instalment credit loans are like Payday Loans in that you get the money really quickly and the lenders who offer them are happy to work with people whose credit history is not flawless. Please bear in mind though that, the longer you take a loan out for, the more money in actual interest payments you’ll repay over time.

When should I avoid getting a Payday Loan?

Because Payday Loans are expensive, you should avoid trying to take them out. You should only take them out if there is an emergency and that you can’t find the money from anywhere else, like friends and family for example.

What if I take out a Payday Loan and then find myself in financial trouble?

Payday Loans, like Instalment Short Term Loans, often belong to a group of loans called “High-Cost Short Term Credit Loans” – that’s a definition given to them by the Financial Conduct Authority, the watchdogs for all consumer lending activity which takes place in the UK.

It’s very stressful for a borrower if they find themselves unable to pay back their Payday Loan but there are now certain guidelines in place which govern how borrowers are treated by lenders.

In summary, what you need to know is that:

  • the lender you work with must tell you about free and independent debt advice and counselling services. People from these services may, if you choose, represent you going forward in your dealings with your lender.
  • when you’re coming up with a way to repay the debt, the lender must not try to take any further money from you.
  • you must be treated fairly and you must be given what is considered a reasonable time to repay the loan.
  • lenders must not bombard you with numerous text messages, emails, and phone calls
  • if, as a gesture of good will, you offer to make a small repayment, they must seriously consider the offer

How can Oyster Loan help me secure a Payday Loan?

Oyster Loan is a broker, not a lender. We don’t actually lend you money ourselves. The role we play is that we match the right borrower with the right lender – but what does that actually mean?

Earlier in this article, we talked about the importance of the “borrower profile” and what’s on your credit report. One lender might be happy with your having £400 a month left after your bills have been paid and a few missed payments over the years. Another lender might only want to work with borrowers with £600 left but they’re happy if you’ve got one or two satisfied county court judgements over the last three years.

It’s really hard for borrowers to find out what a lender’s actual “borrower profile” is, however, because we work with our lenders day after day and they want to work with us to find the right customer, they tell us what their actual “borrower profile” details are and what they like and don’t like seeing on a borrower’s credit report.

Once we have all of your information, we then perform a credit search on you. This all happens within seconds. Our computer system then matches everything you’ve told us with the profiles stored on our systems and it then chooses which lenders to send your details to. Within a few more seconds, we start to get answers back from our lending partners and we then present what we believe to be the best deal we’ve found.

You’re under no obligation to accept a loan offer we find for you. What’s really important to know as well is that Oyster Loan never charges you for our service – the way w make our money is that we receive a “thank you” payment from the lender upon the successful completion of a loan.

Save yourself time and money by getting us to do the searching for you. To start your application, Please Click Here.


  1. Well written article that explains it so well and i totally agree that it should be double checked whether you will be able to make the repayments or not.

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