Payday Loans - Not as complicated as you think

Payday loans do not necessarily have the best reputation in the media. This is partially why some companies have taken to referring to them as �micro loans�, or any other name they can think of.

Part of the reason payday loans can have a bad reputation is the fact that they�re open to misuse, despite being simple and transparent. This has generally been portrayed as being the fault of the loan company rather than the fault of the borrower.

There aren�t any complicated or drawn out repayment plans with payday loans. They just have a single repayment date which is agreed when the borrower signs up. The lender makes absolutely clear when the repayment is due, and how much it will be.

The vast majority apply. It�s actually part of the rules and regulations set down by the Consumer Credit Act 1974 (as amended). It has to be clear � this is why the large APR box is shown so often on payday loan sites.

The APR tends to look high, but this is because, again as part of those rules and regulations, it has to be shown as an annual rate. For something that is usually paid within 28 days, this means that the interest rate is shown far, far higher than is realistic. Nobody applies for a payday loan for a year.

How much do Payday Loans Cost?

To put it simply, an applicant can expect to pay back roughly 25% added to the amount borrowed. If they don�t pay back on the agreed date, they�ll need to pay another 25% the following month. If they continue not paying it of payday lenders are always clear about how much you will be expected to pay before you even back, that end up building up.

Unfortunately, that�s not the way it�s normally explained. It�s usually described as if every customer pays back the same amount they�d pay over a year. Which isn�t really a fair way of describing the situation.

Payday loans are cheaper than, say, unauthorised overdraft charges or credit card penalties. There are cheaper ways of borrowing, but they tend to take longer, or have far stricter criteria. A payday loan is all about the speed and simplicity they provide. You fill in a two minute form, you get an instant decision, and if you accept the agreement, you get cash sent straight to your account.

Payday loans are actually fairly clear and transparent. The important issue is for the applicant to decide whether or not they will realistically be able to repay the loan within the agreed period. If this seems unlikely, a payday loan probably isn�t the right solution. Used responsibly, payday loans can be a fast, useful way of using credit until you get paid.

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