Can you get a payday loan with no bank account?

According to the Financial Conduct Authority (FCA), more than 1.1 million adults in the UK don’t have a bank account. Not having a bank account can be isolating, as many lenders and financial products rely on customers having a bank account to offer their services. This also means that you’re unlikely to be approved for a loan without one.

At Moneyboat, we value responsible lending, so we only offer our short-term loans to customers who are in full or part-time employment and hold a UK bank account or debit card. That way, we can ensure you  can afford to meet the repayments and will receive your funds promptly and securely.

In this guide,  we’ll explore why it’s more challenging to get a loan without a bank account, including alternative lending options, as well as key risks and considerations.

Why is it difficult to apply for a loan without a bank account?

Lenders don’t readily offer customers loans without a bank account in the UK. Almost all online lenders and banks will require you to have a bank account before they will lend to you. There are several important reasons for this, including:

Affordability checks

When you apply for a loan, lenders will check your finances and verify your income through your bank statements or via Open Banking. That way, they can assess your personal cash flow and check that you’re able to afford the loan repayments.

Your bank statements will show lenders all the money coming in and out of your account. It shows whether you’re spending more than you earn, as well as your existing essential financial commitments. Your statements may also show whether you’re repaying other loans. This information, among other details such as credit checks, will help lenders create a complete picture of your loan eligibility.

Making loan repayments

When you take out a loan, you will often agree to repay a certain amount regularly; usually every week or every month until the debt is repaid. You’ll make these repayments through your bank account, either via direct debit or through a continuous payment authority (CPA). Both options mean you don’t have to manually send lenders repayments – it will just be taken from your account on the right day.

Receiving your loan

Perhaps the most important reason why you need a bank account to take out a short-term or payday loan is so you can receive your money. If you want to take advantage of financial products and services available online, you’ll almost always need a bank account.

Can I apply for a payday loan with no bank account?

While it may be possible to take out a payday loan with no bank account, options are limited and can carry more risk. Reputable lenders will carry out a comprehensive credit check before approval, to accurately assess risk as stipulated by the Financial Conduct Authority (FCA).

The FCA is the conduct regulator for the financial sector and requires loan providers to assess the competence, capability, integrity and affordability of applicants before approving a loan.

Having a bank account also allows lenders to easily deposit funds in your account, either by direct debit or standing order, and keep a record of how many instalments you’ve received. Depositing funds directly into a bank account can also offer more security and reduce the risk of fraud and theft.

Finally, storing money in a bank account means that you can earn interest and may be protected against the declining value of money.

If you’re able or willing to open a bank account, you’ll have access to a wider range of lending options. For more on the topic of lending, head over to our guide on everything you need to know about payday loan criteria.

What can I do if I don’t have a bank account?

As previously mentioned, while it can be possible to get a payday loan with no bank account, doing so can be risky, and may be detrimental to your long-term financial health. So, if you don’t have a bank account, you should consider getting one.

Some bank accounts can be difficult to get if you have limited income or a poor credit history. However, many banks also provide basic bank accounts that most people will be able to open. Some banks don’t advertise these basic accounts, but they do exist and may be an option for those who struggle to get a current account.

What are basic bank accounts?

Basic bank accounts offer you similar services to regular current accounts but with a few limitations. For example, basic bank accounts may offer you a pre-pay debit card, rather than a regular debit card, and may not provide overdrafts, arranged or otherwise.

They will, however, allow you to:

• Pay in cheques
• Receive your salary
• Accept payments from a loan company
• Set up direct debits and standing orders
• Pay for items in shops and online
• Check your balance using online banking or apps
• Withdraw money from cash machines or in branch
  
  

To get a basic bank account, you will typically need:

• To be at least 16 years old, or over 18 for some banks
• Proof of ID
• Your address

Learn more about finance essentials, including budgeting and managing credit with our in-depth Personal Finance 101 guide.

What types of loans can you get without a bank account?

While there are options available to borrow money without a bank account, they are often more high-risk.

Pawn shop loans

Pawn shop loans are a type of short term loan that involves exchanging valuable items such as jewellery and electronics for cash. In the meantime, the pawnbroker will hold the items as collateral. Due to higher interest rates, pawn shop loans are often more expensive than traditional short term loans.

Usually, pawnbrokers may only offer you a percentage of the value of the item, rather than the full value. Plus, you may be expected to repay the loan in one payment, rather than in manageable instalments. When you borrow money from a pawnbroker, there’s always a risk that you could lose your collateral items if you don’t meet the repayment terms.

It’s important to make sure that any pawnbroker you consider borrowing from is a member of the National Pawnbrokers’ Association (NPA) and follows the code of conduct to reduce the risk of fraud.

Doorstep loans

Doorstep loans, or ‘home lenders’, as they are sometimes called, are a type of loan that people without a bank account might be able to access. Transactions can be made in cash, and lenders will call to your home and collect repayments on an agreed schedule.

Doorstep lenders must be authorised by the Financial Conduct Authority by law and can only visit your home if you have sent a written request. It’s vital to make sure that any lender you deal with is registered with the FCA – which you can check on the FCA website.

However, just because it’s possible to take out a payday loan without a bank account, doesn’t make it a good idea. This type of loan will usually come with high interest rates, as they represent a high level of risk for lenders.

These high interest rates are offered over a short lending period, meaning doorstep loans often end up far more expensive than other forms of credit. Because doorstep loans are a non-traditional form of borrowing that doesn’t require good credit, the sum of money available is often considerably smaller than those that are offered by traditional lenders.

Considerations of payday loans without a bank account

Getting a loan without a bank account may seem like a safety net in an emergency, but it’s important to assess the potential considerations:

• Higher costs – Loans that don’t require a bank account often come with a high annual percentage rate (APR) and steep borrowing fees. If you can’t make the repayments, you may risk accumulating even more debt.
• Higher risk – If you borrow money from pawnbrokers and can’t repay the loan, you may risk losing your collateral items. Pawnbrokers can sell the item if you don’t meet the repayment terms.
• Limited options – Most lenders require a bank account to lend customers money, meaning that there are fewer options available for those who need a loan without a bank account. These loans can include more restrictive terms, and may offer lower sums of money.

Understanding the risks

While borrowing from a bank or other well-known financial institution means that there may be less to worry about in terms of reputability, unregulated companies may still try to take advantage of customers looking to get a loan quickly with no bank account.

It’s incredibly important to learn how to distinguish between legitimate and unregulated lenders – otherwise you never really know who you’re dealing with.

Alternatives to payday loans

If you don’t have a bank account because you’ve experienced financial difficulties in the past, payday loans are not the only option. If you have emergency costs you need to cover, you could consider one of the following alternatives:

Contact creditors

If you need access to cash quickly because you owe money on another loan or on a bill that you can’t afford, it’s important to contact the company you owe. Any reputable service provider or financial business will listen to your situation and help you repay in a way that’s affordable for you.

For example, HMRC will set up a payment plan if you are struggling to pay a tax bill. Meanwhile,  FCA-registered lenders, utility companies and banks may also consider alternative repayment plans to help support you.

Borrowing from friends or family

Although it’s not easy to ask loved ones for financial help, many people are surprised to find that they’re more than happy to help out if they can. After all, most of us would prefer to support our family members as much as possible. Just make sure you set a clear understanding between yourself and whoever you’re borrowing from! For more on this, check out our guide on borrowing money from friends and family.

Cut other costs

Savings on major costs like utility bills, TV packages and grocery shopping can help reduce your monthly outgoings. It’s a good idea to research your options to make sure you’re getting the best possible deal for your money. Read more about how to find and cancel subscription services you no longer use and see if you could save some extra cash.

The bottom line…

Opening a bank account is a positive move for most people. Whatever your situation, a basic bank account will help you to begin the process of gaining control over your finances, giving you access to tools, services and products that can help you.

Discover more helpful resources

We’ve created a wide range of free tools and resources to help support your financial journey. Explore more financial wellbeing tips on the Moneyboat blog, breaking down finance jargon, credit and more.

For more help and advice, you can always reach out to StepChange, Citizens Advice, and MoneyHelper for independent support.