Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk.


Pay day loan

A pay day loan is an unsecured loan agreed only on the basis that the debtor is currently in employment. It always lasts for a term of less than a month.

Bad credit history

If you have a track record of failing to pay back credit products or bills on time then this will have a negative impact on your credit rating and give you a bad credit rating. When you later attempt to take out another loan, many loan providers will check your rating with the credit agency. If you have a bad credit rating then you may find it harder to obtain loans, credit cards or other credit products.

Loan calculator

The websites of many loan providers provide free loan calculators which take into account the amount you are borrowing as well as the interest rate to calculate how much you will repay on your loan overall.


APR stands for annual percentage rate. It is the interest rate that you would pay if you borrowed the sum in question for a year. If you are borrowing it for a shorter period of time then the effective interest rate may well be far lower.


When you borrow money the main fee you will pay is usually the interest rate, usually quoted as a percentage, accompanied by the words variable or fixed. A variable interest rate is an interest rate on a loan or security that fluctuates over time, because it is based on an underlying benchmark interest rate or index that changes periodically. A fixed interest rate means the interest rate won’t fluctuate or change over time.


When you are asked to put up an asset against the value of your loan, this asset is known as collateral. If you fail to repay the loan on time then the asset becomes owned by the loan provider. Fortunately, pay day loans are unsecured loans meaning that people can obtain them even if they do not have any assets.

Unsecured loan

An unsecured loan is one without any collateral. Almost all pay day loans are unsecured loans.


When you borrow money you are entering a legal relationship in which the company you are dealing with is formally known as the “creditor”. On this website terms like “lender” are more widely used.


The person borrowing the money is also known as the debtor.


When you are taking out a loan it is generally advisable to make a budget first so that you know how your loan repayments will work around your other monthly expenses. This is one of the most basic rules of handling consumer credit responsibly – making a budget.

Total repayment amount

This is the standard way of referring to the amount you will repay in total. It includes the amount that you originally borrowed with interest and any additional fees or charges factored in.

Loan term

Another name for the amount of time you are borrowing the money for is the “loan term”. The longer the loan term, the higher your total repayment amount will be.


You will not generally repay your loan all at once but will instead pay it back in instalments. These help break up the financial burden of the repayments as well as reassuring the creditor that you intend to pay the full amount.