Common Misconceptions About Payday Loans
Payday Loans often carry a stigma that the APR% (Annual Percentage Rate) is quite high. This is because APRs were not designed for fast payday loans. Because of this, it is easily misunderstood.
An APR is a rate that is charged for credit that is repaid over a year, if compound interest is used. Since Payday Loans fast are designed to be repaid in full within 30 days, the APR quoted looks far higher than the actual cost of the loan.
Payday Loans, APRs and OFT Guidelines
Payday loan providers adhere to the OFT (Office of Fair Trading) guidelines and are legally obliged to display the APR. This can often cause confusion. The APR does not affect the total amount repayable on your next Payday. Most Payday Lenders charge a fixed rate for one month Payday Loans which is usually around 25%.
APRs are impossible to use as a tool for comparing Payday Loans against other cash advance needs, such as bank overdraft facilities, store cards and credit cards as it is a different service. High street banks, for example, are not obliged to show an APR for unauthorised overdraft penalties.
A payday loan is an instant solution to short term cash problems, and a remedy when people need a cash advance fast. Loans which are set up to provide ongoing credit over many months usually carry a much smaller APR, even if the total amount repaid is higher. With Payday Bank, you'll always know how much you need to repay in one easy payment.
Once you apply for a loan, you will be presented with the resulting theoretical APR in order for you to be able to compare this APR with other short term money lending solutions such as unsecured loans, credit card advances, and other options.
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