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The short answer
Since 2 January 2015 the Financial Conduct Authority has capped payday and other high-cost short-term loans: interest and fees cannot exceed 0.8% a day of the amount borrowed, default fees are capped at £15, and you can never pay back more in fees and interest than you borrowed. A £100 loan over 30 days costs at most £24.
New arrivals often hit a cash gap: the first salary comes a month after you start, a deposit is due, or money has to go home urgently. Payday lenders are quick and some accept thin UK credit files. They are also expensive. The FCA's cap limits how expensive, and knowing the numbers helps you decide.
The three parts of the FCA cap
The FCA set out the rules in November 2014, in force from 2 January 2015:
- Initial cost cap: interest and fees must not exceed 0.8% per day of the amount borrowed.
- Default cap: default charges must not exceed £15. Interest on unpaid balances is also limited to the initial cost rate.
- Total cost cap: borrowers must never pay back more in fees and interest than the amount borrowed.
The FCA says the cap applies to each loan agreement, including when a loan is refinanced or rolled over, and to repeat borrowing.
What the cap means in pounds
The FCA's own example: a 30-day loan repaid on time costs at most £24 in fees and charges per £100 borrowed.
| Example loan | Days | Maximum interest and fees (0.8% a day) | Most you could repay on time |
|---|---|---|---|
| £100 | 30 | £24 | £124 |
| £300 | 30 | £72 | £372 |
| £500 | 14 | £56 | £556 |
| £500 | 45 | £180 | £680 |
These are the ceilings, not what every lender charges. The total cost cap means a £300 loan can never cost more than £300 in interest and fees combined, even if it goes badly: the most you would ever repay is £600.
Example of a missed payment
Example: you borrow £300 for 30 days and cannot repay on the due date. The lender may add a default fee of up to £15, and interest continues at up to 0.8% a day on what is unpaid, but the total of all interest and fees is held at £300. That is still a heavy cost for one month's gap.
Rolling a loan over, or taking a new one to pay off the old, does not reset the protection to your advantage: the FCA says the cap covers charges when a loan is refinanced. But each new agreement is a new loan with its own cap, so a run of back-to-back loans can cost far more in total than any single one.
Risks beyond the price
- Your credit file: payday loans are credit agreements and are commonly reported to credit reference agencies. Mortgage brokers often report that some lenders view recent payday borrowing negatively when you later apply for a mortgage. See our guide to building a UK credit score.
- The cycle: repaying one loan leaves you short next month, which leads to another.
- Unlicensed lenders: anyone lending to you must be authorised by the FCA. Check the FCA register before you apply.
- Your visa: borrowing does not affect visa status by itself, but debt problems that lead to court action are stressful to carry through a renewal.
Before you sign
- Check the lender is on the FCA register under its exact name.
- Read the total amount repayable and the repayment date on the agreement.
- Work out the cost per day and compare it with the 0.8% ceiling.
- Ask how it will collect payment and how you can change or cancel that.
- Borrow only what closes the gap, for the shortest term that you can meet.
- Plan what you will cut next month to repay without borrowing again.
Many newcomers borrow to send money home in an emergency. Before you do, ask whether the family need can wait a week, or be split into a smaller amount now and the rest after payday. A £300 gap borrowed for 30 days can cost up to £72; the same gap closed by a week's delay costs nothing.
Alternatives to try first
- Ask your employer about a salary advance.
- An arranged overdraft is priced under different FCA rules; compare the cost. See UK overdraft charges.
- A credit union loan, if you can join one locally.
- Speak to a free debt charity before borrowing to repay other debts.
- Ask family to delay a request for money home by a month, if that is possible.
Where Pryme fits
Pryme does not offer UK loans. For family support that strains your budget, an Personal Assistant can help plan transfers around payday, and an emergency fund is the long-term answer to the cash gap.
This page explains the FCA's published rules. It is not financial advice.
Questions people ask
What is the maximum interest on a UK payday loan?
Interest and fees cannot exceed 0.8% a day of the amount borrowed, under the FCA cap in force since 2 January 2015.
How much can a payday lender charge if I miss a payment?
Default fees are capped at £15, and interest on the unpaid amount is limited to the same 0.8% a day. Total interest and fees can never exceed the amount borrowed.
How much does a £100 payday loan cost for a month?
The FCA says no more than £24 in fees and charges for a 30-day £100 loan repaid on time.
Will a payday loan affect my mortgage application?
It appears on your credit report and some lenders take it into account. Check your report and ask a mortgage adviser.
Sources
- FCA confirms price cap rules for payday lenders (Financial Conduct Authority) · accessed Oct 2026
- Millions of customers together save nearly £1billion due to overdraft rule changes (Financial Conduct Authority) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.