11 octobre 2013 ~ 0 Commentaire



If you put ‘payday loans’ into Google, as well as getting lenders you will see news articles and maybe even a blog or website entry that is heavily critical of these types of loans. But if you also look at the websites of many of the payday loan providers themselves then you will see that most of them have statements on how they will act responsibly when considering applications.

A lot of criticism that is levelled at payday loans relates to the very high APR that legally has to be displayed. Some of these APR figures look truly frightening; over 2000% is not uncommon. But the problem with these numbers is that they completely fail to give a true picture of what you would actually pay for borrowing money this way.

Compare a typical £500 pay day loan with the same amount borrowed with a personal unsecured loan. Typical unsecured loan APR rates look much lower than the pay day loan rate, but when you consider that the pay day loan will cost around £125 to borrow – making a total of £625 to be repaid – and the personal loan over a minimum six month term would cost a total of £721* then the comparison doesn’t start to look so bad.

Using a credit card to buy something for £500 is obviously going to work out cheaper so long as you can pay it off fairly quickly, but if you need cash in your bank account then the fees associated with using these can work out to be fairly expensive. The great thing about payday loans is that they can help to instill discipline in your finances. Research has shown that most people do not tend to pay off their credit cards bills in full every month even if it is a manageable amount. Debts like these can easily mount up, eventually becoming absorbed into a debt consolidation loan. The effect is that this debt never actually goes away it simply gets moved from one place to another within a person’s personal finances.

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