High-cost short-term credit (HCSTC) provides quick access to cash at very high interest rates. The FCA caps the cost: no more than 0.8% per day, total cost cannot exceed 100% of the original loan, and default charges are capped at $15.
Why these loans are expensive even with the cap
A $200 loan for 30 days at the maximum rate costs $48 in interest — an APR of approximately 1,500%. Even with the cap, short repayment periods and high daily rates make these loans extremely expensive. Adding a high-cost loan repayment to a household already under financial pressure often makes the underlying problem worse.
Better alternatives to consider
- Credit union loans: member-owned cooperatives often offering lower rates than banks. Find a credit union at mycreditunion.gov
- CDFIs (Community Development Financial Institutions): affordable loans for people who struggle to access mainstream credit — find one at cdfifund.gov
- Employer salary advance schemes: some employers offer advances on wages at no cost
- Government assistance: if waiting for SNAP or other benefits to start, contact your local benefits office about emergency food or cash assistance
If you already have payday loan debt
Do not take out a further loan to cover an existing one. Contact the lender directly and ask for a repayment arrangement — FCA rules require lenders to work with you in financial difficulty. If the original loan was unaffordable when granted, you may have grounds to complain to the Financial Ombudsman Service.
General guidance only — not regulated financial advice.