The company had been struggling due to a “significant” increase industry-wide in people making claims in relation to historic loans.
The firm had been "considering all options" just weeks after shareholders pumped £10 million in a bid to save it from going bust.
But what does all this mean for customers?
Will Wonga customers still have to keep up with payments?
Wonga has said that despite the collapse, customers are still required to repay any outstanding money.
Prior to the collapse, when the company was in difficulty, it was still advising customers that they had "three days to repay before we charge you a missed payment fee of £15".
Consumer advice website 'Which?' told ITV News: "We would suggest customers of Wonga continue as usual with paying back their loan until (and if) they are advised otherwise, to check their contract to make sure that nothing about the terms of their loan and repayment schedule will change in the event of their loan being sold on to another company as part of the administration process.
"We would advise that they should continue to apply for compensation, although we cannot guarantee what provision is available in the event of administration and would expect the administrators to issue guidance on this."
What happens to my loan now that Wonga is in administration?
Wonga's main assets are loans and administrators would still want to claw back the money owed.
It is thought that the only side of the business that will be affected is the lending of money.
What happens if my debt is sold, do I still have to pay the loan back?
Yes. Instead of owing Wonga, you will be paying the new creditor.
The terms and conditions of the original agreement with Wonga shouldn't change.
Why is Wonga paying customers compensation?
Wonga has faced a barrage of criticism over the high interest it charges on its loans and it has been accused of targeting those who are vulnerable.
In 2014, the firm introduced a new management team and wrote off £220 million-worth of debt belonging to 330,000 customers after admitting making loans to people who could not afford to repay them.
Can I claim compensation?
According to Money Advice Online, in order to get a refund on a payday loan the individual would have to prove "'unfair lending' and the loans could not be repaid without 'undue difficulty’".
The regulator of payday loans, the Financial Conduct Authority, states that any payday loan has to be affordable.
In other words, customers shouldn't have to keep borrowing to make the payments.
Individuals seeking compensation would have to make a case for unaffordability of their payday loans in order to claim compensation.
Money Advice Online told ITV News: "It is still worth making a claim for compensation, if you don't ask you don't get.
"Payday lenders have gone into administration before and carried on paying out for a very long time, such as Cash Genie.
"Others, such as Cheque Centres, stopped paying refunds within a couple of months as they ran out of cash."
Financial advice website, Debt Camel, suggests giving Wonga eight weeks to respond to a complaint.