A payday loan is a short term unsecured personal loan that is usually repayable on the borrower's next payday (within 31 days). The website examines the dangers of these in the UK.

In the UK, a significant number of users have poor histories when it comes to credit scores, limited access to other forms of credit and pressing needs.

APRs are typically in excess of 1000% with the sector proving to be very profitable. Starting a payday loan business would be worthwhile, although these loans can have adverse effects on communities if profits are put before people.

The UK has seen a rise in high-cost credit including the provision of home improvement loans through third party finance companies who work in partnership with window firms. Finance packages are often offered and completed by sales representatives at the time a double glazing quote is given. The interesting thing is that neither the consumer nor the representative have a complete understanding of how much these packages can cost over time. To me this is misselling!


As of June 2013, there were about 250 payday loan lenders within the UK of which 3 account for over half of the market by turnover and loan value. The average loan taken out by customers is £265-£270 with an average credit charge of £25 per £100 borrowed .

In 2011/2012 there was an estimated 8.2 million loans taken out by consumers nationally, with the biggest payday lender in the industry recording pretax profits of £62.4 million. This industry now has a value of £2.2 bn.

Clearly payday loans are increasingly popular. The article by The Many Firm touches on some of the reasons for their popularity.


Payday loans have a very high return on investment due to their high APRs. However, starting a payday lending business is not as simple as it first appears. There are several licenses and regulations under which lenders must operate to comply. The extremely high APR results in the industry being scrutinised and painted negatively in the media. This BBC video on the Many website is one example.

As a payday loan lender you should follow regulations and guidelines to the letter and promote excellent practice. You should be prepared to defend your business and highlight any positive impact you have on the community.



Within a payday loan business you can generate revenue in one of two ways: You can either be a direct lender or the broker. You stand to generate a much higher income by building a brand and lending directly. Visit for an example of common bad practices within the credit broking industry. As a lender you want your customers to pay you back. It is therefore in your interest to carry out some type of credit check or assessment prior to lending. It is important that you understand your obligations as a lender. You should also check out for further details. Other similar businesses include services such as logbook loans that offer alternative subprime solutions.


This video explores the effects of payday loans in the US, highlighting how the media ostracizes payday lenders. You should be prepared for this if you plan on operating within this sector.

If you visit, you will see how bills have been passed to regulate the payday loan industry tightly and in some cases these businesses have become infeasible. The video asserts that when regulations such as these are introduced, consumers bounce cheques and file for bankruptcy at a higher rate, which suggests that services such as have a positive impact. The high APR is justified by the cost of both running such a business as well as loan write offs. After factoring in costs, payday loan profits appear in line with other financial institutions of similar sizes.

With the OFT being replaced by the FCA, the tightening squeeze on lenders should be interesting to watch. Other similar service providers are restructuring their business models to adapt to the ever changing environment. Here is an example of an instant cash loan service provider at is very important to maintain and promote a positive image in this industry and in particular avoiding negative practices such as marketing loans to the vulnerable, as shown on For advice on payday loan alternatives check out the pounds till payday page

Growth of UK payday loans

The year of 2013 has seen the payday loan market continue to expand with 90% of the 10 biggest payday lenders doubling their turnover. This has been largely due to increased restrictions in mainstream lending and contraction in the economy as the number of unemployed borrowers rose in early 2013. See for verification. One lender was even able to increase their profits 32-fold, despite being in a recession. Instant payday loans are marketed as short-term credit solutions that can work out cheaper if used as such. A year long review by the Office of Fair Trading discovered that 50% of turnover generated by lenders actually came from long extensions - meaning that the loans were not actually used as short-term credit in these instances. The biggest lender reportely generated profits of 62 million from a turnover of 309 million, through the payday loans service with no fax. There has been an increase in payday loan ventures with 24 new ventures launches since 2008. Although this would initially give the impression of increased competition, has found this not to be the case. The increase in turnover will back that statement up.

Lending stream is a firm that charges interest rates of around 4,000% APR has managed to increase its profits by 42 times in three years. Another firm, Wage Day Advance has increased its profits by 32 times. However, in 2011 Lending Stream was the only lender that did not report a profit, having apparently paid £5.2 million in royalties. The competition commission is now looking at the sector as a whole and it appears that more regulation will be placed on the industry. It has been said that payday loan lenders are taking advantage of a unique UK payday loan market - unique in that regulation has been non-existent until now. These change will affect both brokers and direct leners. See for more. This article can be found at