12/11/2014 12:44 GMT | Updated 12/01/2015 05:59 GMT

The Demise of the Payday Loan?

Steven Lewarne via Getty Images

Finally the Financial Conduct Authority has seen sense and announced a cap on the amount that payday lenders can charge their customers. About time too! From January 2015 payday loan rates will be capped at 0.8% of the amount borrowed and no-one will have to pay back twice what they borrowed. On top of that, there is even more great news because there will now be a £15 cap on default charges. For those people who have been struggling to pay off their payday loans and have got themselves into more and more debt, this is very welcome news indeed. Hopefully it will finally put an end to payday loan debts that continue to spiral out of control.

Since proposals were first made back in July, many payday loan companies have been improving their working practices and putting limits on loans rolling over but we always knew that more could be done. So many vulnerable people have fallen victim to payday loan companies and if these proposals stop that happening in the future, then I for one will be very happy. Payday loan companies need to be more careful about who they lend to so that those most in need are not punished.

Sadly, the demand for people wanting to borrow money will still exist...naturally debts don't disappear overnight but there are still other viable options for people. I have heard payday loan companies claiming that these proposals will drive borrowers into the arms of illegal loan sharks but I hope that this will not be the case. I am sure that the number of payday loan companies will reduce as a result of these proposals but personally I think that this is a good thing.

If you do need to borrow in an emergency, there ARE other options.

• If you are struggling to pay a bill, before you turn to a payday loan, call the company you owe first as most regulated energy and credit companies MUST help you set up a payment plan

• An interest free loan from friends or family is ALWAYS your best option. Set up a realistic payment plan with your 'lender' so you both know how and when it will be paid back and then STICK TO IT to avoid any unnecessary fallings out!

• Speak to your bank about extending your overdraft as this can be actioned on the same day usually.

• Credit Unions are a good option for those who have been declined credit elsewhere. They offer small loans with interest that cannot by law exceed an APR of 26.8%. They are not for profit organisations where members save and borrow money. Credit Unions all vary, some will let you apply online, others over the phone and you are likely to need proof of address, a couple of months of bank statements and a recent pay slip.

• Remember, if you are really finding that your debts have spiralled out of control, there is a way out so please don't panic. Charities like StepChange are brilliant and the Citizens Advice Bureau are great. The important thing is that you don't keep borrowing.

So for now the proposals have been made and we welcome them with open arms - let's just hope that they are properly policed and the regulator continues to do its job. For now though this is a great step forward.

If you want more information about ways to avoid payday loans read my guide to emergency borrowing