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Pay day loans are instant cash advances which are repayable by your next payday. They are designed to help you manage your finances for any unexpected bills or costs over a short term period (usually up to 30 days).
The typical lending criteria tends to be over 18 years age, regular employed and a bank account in which the salary is paid. In terms of saving money, this may mean a better deal than other unsecured loans as the cost of borrowing on payday loans are generally not very different between average and poor credit ratings.
Is an APR of 1700% a real cost? No. Payday loans tend to have an APR of around 1700% or more. The APR % is an annualised and relative measure of borrowing costs and can be misleading for very short term loans. The true cost of payday loans are the £ per £ actual repayment and borrowing difference. Around £25 per £100 is a typical borrowing cost which in real terms means 25%. However bearing in mind that this is still a high interest charge compared to banks due to the no documents, limited credit check nature of the loans.
Is an APR of 1700% a real cost? No. Payday loans tend to have an APR of around 1700% or more. The APR % is an annualised and relative measure of borrowing costs and can be misleading for very short term loans. The true cost of payday loans are the £ per £ actual repayment and borrowing difference. Around £25 per £100 is a typical borrowing cost which in real terms means 25%. However bearing in mind that this is still a high interest charge compared to banks due to the no documents, limited credit check nature of the loans.
What is the best tip? Compare pay day loans before you sign up to one. Simply borrow as little as you can and pay it as quickly as you can. This cuts the cost of borrowing and saves you money. Also, it would be a good idea to start putting a small amount of money aside every month incase an unexpected bill or cash need comes up on a rainy day. You can then meet that cash requirement without having to pay any interest charges at all.
Payday loans range from £80 to £1,000 and usually do not require sending documents. Many lenders offer pay outs within 24 hours and with an extendable repayment term.
Cheaper than overdrafts? Payday loans are cheaper than bank overdrafts in most cases as the cost of borrowing on payday loans can be around £25 per £100 borrowed. Overdrafts with most high street bank can be very heavy on charges and interest aside, you could end up paying penalties on a per day basis (eg: HSBC at one stage charged penalties of more than £20 per day regardless of the overdrawn amount.
Bad credit history ok? A number of payday loans seem to be issued to people with poor credit ratings and CCJs, so all credit ratings are accepted subject to a lending criteria.
Cheaper than overdrafts? Payday loans are cheaper than bank overdrafts in most cases as the cost of borrowing on payday loans can be around £25 per £100 borrowed. Overdrafts with most high street bank can be very heavy on charges and interest aside, you could end up paying penalties on a per day basis (eg: HSBC at one stage charged penalties of more than £20 per day regardless of the overdrawn amount.
Bad credit history ok? A number of payday loans seem to be issued to people with poor credit ratings and CCJs, so all credit ratings are accepted subject to a lending criteria.
Payday loans