Payday Loans - Interest rates are not all doom and gloom
Whenever the words payday loans come up in conversations, common responses often include: "Oh no, don't they have high interest rates!" but when payday loans are compared in practice to other forms of lending, the shrieks of concern do not add up with the reality.
The usual APR (Annual Percentage Rate) for a loan is determined mathematically based upon how much it would cost someone to pay interest on a loan throughout a whole year, thus the use of the word 'annual.' However, payday loans are unlike credit cards and overdrafts because they are not paid back throughout the year. Instead, payday loans UK they are paid back once, in one lump sum as short term solutions. That means choosing to measure them in the same way as other loans, which people often do, is unfair but all loan products must legally display the associated APR.
Payday Loans Are Honest
Whilst other forms of lending tie people into contracts and try to get them to utilise credit in an effort to build debt (and interest, which is how lenders make money), payday loans UK are different. The lender knows that the borrower is not going to be a customer for the whole year, only for a few weeks, so they charge an honest, up-front interest rate on the single loan.
The usual interest rate on a payday loan is around 25%. Other loan providers might charge lower interest rates such as 16% but they do it for the course of the whole year, which gives them the opportunity to make more money on each customer in interest charges as they are spread over a far longer time period. Mainstream lenders also offer people the chance to not pay off their debt each month and pay interest instead. This leads to some borrowers who have mainstream credit products such as credit cards only paying interest on a routine basis and developing a habit without ever reducing their debt.
For many borrowers, the interest on credit cards adds up to hundreds of pounds per year and works out to be far more money than a borrower would have paid if they had taken out a payday loan instead. The same hypothetical borrower would also have paid their loan back two weeks after they had taken it out on their payday, becoming debt free if they had chosen a payday loan instead of credit card. Credit cards and overdrafts can lead to an insane APR, many times that of comparitively cheap payday loans.
Because payday loans are paid off when the customer's salary reaches their bank account, they offer a way for people to get out of the cycle of debt. Long term loans can create debt building habits such as making unnecessary impulse purchases and charging items to credit cards but payday loans are taken out and paid back within 30 days. They are also fast to process, with funds regularly reaching an applicant's bank account the same day they apply.
In order to be eligible to apply for payday loans, you don't have to have a spectacular credit history or anything like that. If you're a UK resident aged 18 or over, and if your wages are paid into a UK bank account, you're already eligible to apply. Just go to our application form and enter some basic details, including your contact details, employment details and bank details, and you'll be able to get a fast decision about cheap payday loans, and you'll be under no obligation to accept. If you are offered a payday loan UK, then the cash will be sent to you if you do choose to accept it. It's simple, safe and you'll be given all the information up front.
See more payday loans new on our Payday Loans News section.
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