Borrow £200 from a payday lender today, and by law, no matter what happens next, you will never be asked to pay back more than £400. That's not a marketing promise from a lender trying to look responsible. It's a hard ceiling written into FCA rules, and it's the main reason the payday loan market you might remember from a decade ago barely exists anymore.
What the price cap actually says
The Financial Conduct Authority's High-Cost Short-Term Credit price cap has been in force since January 2015, and it works on three separate limits rather than one headline number. First, interest and fees combined cannot exceed 0.8% of the amount borrowed per day — so a £200 loan can cost at most £1.60 a day in charges, whatever the lender's advertised APR looks like. Second, if you miss a payment, default fees are capped at £15 flat, regardless of how many days you're late or how many times you've defaulted before. Third, and this is the one that changed the market most, the total cost cap means the sum of interest, fees, and charges can never exceed 100% of the original loan amount. Borrow £300, default, get charged, restructure the debt — none of it matters. £300 is the absolute ceiling on what you'll ever owe on top of what you borrowed.
Compare that to before 2015, when representative APRs on short-term loans regularly sat between 1,000% and 5,853% (that last figure was Wonga's own quoted rate for several years), and a borrower who fell behind could watch a £100 loan balloon past £1,000 through rolled-over interest and default charges. The cap didn't just lower prices — it removed the mechanism that made payday debt spirals possible in the first place.
Why the market is a fraction of its former size
Wonga's collapse in August 2018 is the reference point most people remember, but it wasn't caused directly by the price cap — it was buried under the weight of historic mis-selling claims once the Financial Ombudsman Service started upholding complaints about loans issued before affordability checks tightened. QuickQuid followed in October 2019, and Instant Cash Loans (which traded as The Money Shop and PaydayUK) went into administration the same year. Between 2013 and 2019, the number of firms holding an FCA licence for high-cost short-term credit fell from roughly 400 to under 50, according to FCA market data published during that period. The combination of the price cap squeezing margins and the affordability rules raising the cost of underwriting each loan meant that lenders relying on volume and high default rates simply couldn't make the sums work anymore. A business model built on a small share of borrowers defaulting hard enough to cover the losses from everyone else stopped being viable the moment the maximum loss per defaulting customer was fixed at 100% of the loan. What survived is a leaner segment of the market that underwrites more carefully and turns away far more applicants than the old players ever bothered to.
What's left in the UK in 2026 is a much smaller field of FCA-authorised lenders operating under the current rules: Lending Stream, Cashfloat, Everyday Loans (which sits closer to guarantor-style unsecured lending), Fund Ourselves, and a handful of others still hold active permissions for high-cost short-term credit. You can check any lender's status directly on the FCA's Financial Services Register before applying — search by firm name and confirm the permission covers "consumer credit lending", not just credit broking, because unlicensed brokers reselling your details to multiple lenders is still a live problem even with the legitimate lending side cleaned up.
What £200 for 30 days actually costs now
Take a representative example under the current cap. Borrow £200 for 30 days at the maximum permitted rate of 0.8% per day: that's £1.60 a day, or £48 over the full month — bringing total repayment to £248. If you repay on time, that's the whole story. Miss the payment and default once, and you're looking at up to £15 on top, plus continued interest accrual until the total cost cap of £200 (100% of the loan) stops it dead. In practice, most FCA-authorised lenders today quote representative APRs somewhere between 700% and 1,500% for a typical short-term loan — high by any conventional measure, but bounded, predictable, and disclosed upfront rather than compounding indefinitely.
That £48 cost for a month's borrowing is worth holding against the alternatives before you commit to it. An unauthorised overdraft on the same £200 could easily cost more once daily fees are added, depending on your bank's current charging structure — some High Street banks still charge upwards of £5 a day for unarranged borrowing, which on a 30-day stretch beats the payday loan's total cost outright.
Affordability checks aren't a formality anymore
Since 2014, FCA rules under CONC 5.2A require lenders to assess whether a loan is affordable before it's approved — not just whether you're likely to repay it, but whether repaying it will leave you able to meet your other essential commitments without hardship. In practice, this means most legitimate short-term lenders now check your bank statements or use open banking data feeds, cross-reference your income against declared outgoings, and run a credit check through one or more of the three main reference agencies. Applications that would have sailed through in 2012 — no payslip, no bank statement, approval within minutes based on a name and a mobile number — get declined routinely now, and that's by design rather than an oversight in the system.
This is also where a lot of the remaining complaints about payday lending actually originate: not from the loans that get approved, but from the volume of declines borrowers hit before finding a lender willing to say yes. Each hard search leaves a mark on your credit file, and stacking five or six applications in a fortnight because the first four turned you down does more damage to your score than the original loan ever would have.
What repeated short-term borrowing does to your file
A single payday loan, taken out and repaid on schedule, is a mixed signal on a credit file rather than a purely negative one — it shows you can manage a credit commitment, but mainstream lenders (mortgage underwriters especially) read repeated use of high-cost short-term credit as evidence of cash-flow strain, and it stays visible for six years like any other credit account. Two or three payday loans in a 12-month window is the point where most mortgage brokers will tell you plainly that it's going to complicate an application, even if every one of those loans was repaid on time and in full. Lenders aren't checking whether you defaulted; they're reading the pattern of needing short-term credit at all. Some high-street lenders will decline a mortgage application outright if a payday loan appears anywhere in the last 12 months, regardless of the amount or the repayment record, while others will proceed but only at a worse rate once the underwriter has flagged the file for manual review. Specialist and adverse-credit mortgage brokers exist precisely because of cases like this, and they can usually still place an application that a high-street lender would reject on sight — but that route tends to come with a higher rate than you'd have secured with a clean file. The safest assumption, if a mortgage is anywhere on your horizon, is that any short-term credit use in the preceding year will be read, questioned, and priced.
If you're planning to apply for a mortgage or a large unsecured loan within the next 12 to 24 months, taking out a payday loan now — even a small one, even one you're confident you can repay — is worth avoiding if there's any alternative at all.
Where to look instead
Credit unions are the most underused alternative in this conversation. UK credit unions are FCA-regulated, member-owned, and capped by law at charging no more than 3% interest per month (42.6% APR) on loans — a fraction of even the capped payday rate — and many offer small short-term loans specifically designed to compete with high-cost credit, sometimes within 24 to 48 hours of application if you're already a member. Find one covering your area through the Association of British Credit Unions Limited (ABCUL) directory; membership usually requires a small savings deposit and a connection to a common bond (where you live, work, or a shared employer), which puts some people off, but for anyone with a stable income and a genuine short-term gap, it's worth the setup time.
An arranged overdraft extension, agreed with your bank before you need it rather than after you've gone over the limit, is usually cheaper than payday borrowing for anything under a few hundred pounds and doesn't show up as a new credit application on your file. Buy Now Pay Later is not a safe substitute for a payday loan despite looking similar on the surface — it's designed for retail purchases spread over weeks, not cash-flow gaps, and since the FCA brought BNPL under regulation in 2026, missed payments on it now report to credit files the same way any other credit product does. If your local council or employer runs a budgeting advance or salary advance scheme, that route typically carries no interest at all and should be checked before any of the above.
- Credit unions — capped at 42.6% APR by law, FCA-regulated, find one via the ABCUL directory
- Arranged overdraft extension — agreed in advance, usually cheaper than a payday loan for small amounts
- Employer or council salary/budgeting advance — often interest-free where available
- Local welfare assistance schemes — worth ten minutes checking before signing anything with an APR above 500%
None of these will move as fast as a payday lender's same-day transfer, and that speed is exactly what the industry has always sold. But a £48 cost on £200 borrowed is only the cheap option relative to what payday lending used to be — not relative to what's sitting one phone call away at a credit union that most borrowers never think to ring first.