Leading Payday Loan Broker PaydayBank Says Don´t Judge on APR Alone

APR and Payday Loans

Mar 02 2010 - 14:56 CET

As an increasing number of Brits struggle with their debts in 2010 leading payday loan provider PaydayBank urges those looking to take out additional credit not to judge payday loans on APR alone.

PaydayBank, the UK´s leading online payday loans broker gives customers the ability to apply online for an unsecured loan of up to £750, believe that the APR rates on their loans are the wrong metric that should be used for measuring how much they cost and they only act to confuse consumers into believing they are an extortionate form of lending.

APR stands for Annual Percentage Rate and every financial service provider must quote an APR so that consumers can measure how much the credit will cost them over the course of a year. Although they are often manipulated by lenders to look more attractive than they actually are, APR can be a good measurement for comparing long-term loans or for comparing loans of a similar type, but they are not suitable for comparing short-term loans such as payday loans.

Ohad Hessel, Marketing Manager at PaydayBank explains;

"The APR on a typical payday loan can look very expensive at first glance, but the yearly calculation of APR is the wrong way to judge payday loans because these are short term loans for relatively small amounts of money, designed to be repaid quickly."

Conventional Loans Vs Payday Loans

Research by PaydayBank found that if you took out a conventional loan of £500 at an APR of 16.9% and repaid it back over 36 months (3 years) it would cost you £745 to repay the total - an actual interest rate of 49%. If on the other hand you took out a payday loan of £500, with the aim of paying it back on your next payday a month later it would cost you £625 or 25% interest. Independent research in April 2009 found that 96% of payday loan customers were satisfied with the service offered by payday loan providers.*

Housing charity Shelter announced in January that up to 1 million households in the UK are paying their mortgages on credit cards each month, storing up considerable debt problems for the future.

But a payday loan could be a better option for many, Hessel believes;

"Payday loans have many advantages over credit cards when it comes to managing your finances. Many of our customers prefer payday loans over credit cards because they have to decide before-hand exactly how much they need to borrow, whereas with a credit card they get what can feel like free money in the form of massive credit limits that do nothing but encourage them to spend more than they can afford, getting in to more long-term debt."

"If you are only looking for an ´emergency loan´ to pay outstanding bills or need some additional money one month, perhaps to avoid paying the extortionate bank charges High street banks inflict on customers who go over-drawn - then a payday loan could be a better long-term solution for those in employment."

PaydayBank was established in 2005 and aim to help as many customers as possible with their short term cash needs. Applicants must be UK residents and over 18 years old and in employment.

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