These are expensive, short-term loans that were originally designed to tide you over until payday, hence the name.
The money is paid directly into your bank account. You repay in full with interest and charges – at payday – or at the end of the month if you’re paid weekly or irregularly.
Usually, you can only borrow for up to three months, and the amount you can borrow will be relatively small – up to around £1,000.
Interest and charges will be much higher than on a personal loan from a high-street bank.
But ‘Total Cost Cap’ rules set out by the Financial Conduct Authority (FCA) mean that you never have to pay back more than double the initial amount you borrowed.