Money Advice Service

If you’re often short of cash as payday approaches, it’s tempting to take up offers of quick and easy cash – but there are serious risks. We’ll show you your options and explain what to look out for.

Credit Unions

Credit unions are a cross between a co-operative and a bank. They are set up by people with a common interest, such as where they live or work, and offer low-interest loans, savings and sometimes bank accounts.

If you’re looking to borrow cash to tide you over, this is a good place to start. Credit unions act in the interests of all members and so don’t let their members take out loans they cannot pay back. There’s also a cap on the amount of interest they can charge on their loans of 2% a month or 26.8% a year APR. However, some credit unions insist you save with them first before they'll let you take out a loan.

Borrowing from a credit union

Payday loans

Top tip

Payday lending is marketed as a 'bridge' until your payday but it's not a solution to debt problems. Avoid them if you can, but otherwise borrow as little as possible for as short a time as possible, making sure you can afford to pay it back.


Payday loan services make it sound easy. “We’ll give you a cash loan now and cash your cheque or debit your bank account after your next payday.” But you need to be aware of how much they will cost you – both in fees and high interest rates.

Interest rates of more than 1,000% APR are not unusual – that’s right, a thousand per cent. Although the company might claim their loans are designed to be taken out for only a few weeks, there may well be cheaper ways of borrowing the same amount of money. Avoid payday loans if you can.


What to watch out for if you take out a payday loan

  • Don’t borrow any more than the absolute minimum.
  • Make sure you can pay back the loan as planned before taking it out.
  • Shop around – compare APRs (the total cost of borrowing money for a year) and go for the lowest one.
  • Don’t set up recurring payments through a debit card – they may make several attempts to charge your card, costing you bank fees if you don’t have enough to cover the charge. A Direct Debit instruction may be a better option, if it's available.

Find out more in our guide to Payday Loans

If you’re tempted to use a payday loan because your debt is getting out of hand, talk to a free to use debt advice charity first.

Where to go to get free debt advice

Pros and cons of payday loans

  • Quick to apply for.
  • Quick access to money.
  • Very high interest charges.
  • Hard to tell reputable firms apart from ‘cowboys’.
  • Debts can quickly spiral out of control.

Using a short-term overdraft instead

The better option for surviving until payday may be to use your bank’s overdraft facility if you're able to get one. Just speak to your bank to see if they will authorise one for you and it could save you hundreds of pounds over payday loan services.

Overdrafts – how to use them without breaking the bank

Cash for gold

A quick internet search for ‘cash for gold’ will lead you to dozens of companies willing to take your gold jewellery, coins or other trinkets in exchange for cash. Some of these firms have good reputations; others have earned numerous complaints to Trading Standards. So, it pays to be careful.

Pros and cons

  • If your jewellery is just gathering dust, then releasing its value could be a good idea.
  • They will accept broken jewellery.
  • With so many unscrupulous dealers out there, you have to do careful comparisons to make sure you’re getting a fair deal.
  • The value of the gold will be much lower than the initial cost of the jewellery.
  • Once your gold valuables are gone, they’re gone for good.
  • There have been many complaints to Trading Standards about cash for gold schemes. You could do an Internet search to find out what people are saying about the dealer you’re considering.

What to watch out for

Top tip

Get proof of posting to make sure they don’t try to cut your decision time any further by saying an item arrived later than it really did.


If you know the true value of what you’re selling, a dealer won’t be able to take advantage of you. Weigh the item. Know what carat it is (the higher the carat, the higher the purity of the gold and the more the item is worth). Then, check the current price of gold or use a jewellery value calculator to get the value.

If you use a postal scheme, the company may not give you much time to accept or decline their offer.

Finally, when comparing offers, be sure to get a quote from your local pawnbroker.


A pawnbroker will give you a short-term loan in exchange for your valuables. If you repay the loan and the interest, you’ll get your item back. If you can’t come up with the cash, the pawnbroker will sell your item to cover the cost of the loan they made.

A logbook loan is similar, but in this case, your car is what you’re using as security for the loan. The law in this area is complex, so make sure you understand what you are getting into, how it works and what could happen if things go wrong.

Pros and cons

  • You can borrow a larger amount if your valuables are worth enough.
  • Interest rates are usually lower than those for payday loans.
  • Interest rates are still very high compared to most other ways of borrowing money.

What to watch out for…

  • Do some research in advance so you know the true value of what you’re handing over.
  • Get clarification on the total cost of the loan, including all interest and fees.
  • Make sure you understand how to get your valuables back at the end of the term.
  • There’s always a chance you may not be able to repay the loan, so don’t pawn something you can’t afford to lose. For example, if you need your car for work, don’t get a logbook loan.

Look for a pawnbroker that's a member of the National Pawnbrokers Association (NPA) as there is a code of conduct plus sanctions if members breach the code, so you have additional protection above what the law provides.

Visit the NPA website to check whether your local pawnbroker is a member

Pawnbrokers – how they work

Cutting back and improving your cash flow

If you’re finding yourself short of cash each month, there are a number of simple steps you can take to cut back. Follow the links below to find tips and tools that will help you stay on top of your finances and reduce the likelihood of having to get quick access to cash.

Beginner’s guide to managing your money

This article is provided by the Money Advice Service.


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