Pay day loans

Pay Day Loans

Pay Day loans have been designed to be quick fix loans which you pay back as soon as you have been paid. They can be ideal in the event of something out of the ordinary happening such as your car breaking down or your central heating packing up in the middle of winter. From the time of application, if you are accepted, it can sometimes only be 24 hours until the money is in your account. Most people know that this type of loan is a fast loan, but they usually think that it is also a cheap loan, but is that really the case?

Alternative Options to Payday Loans

You really need to consider all your options before taking a pay day loan. Look at the other ways which you could obtain the money you need, from using your credit card, dipping into your overdraft, borrowing the money from family or a friend or even asking you boss for an advance on your salary. This may turn out to be a much cheaper option if you intend to pay all the money back in less than 30 days.
If you have no other option and decide that a pay day loan is the easiest and quickest way for you to get some additional money, then you must be aware of the charges which you are set to incur. Most pay day loans set their charges as a monetary amount for every £100 borrowed and this charge can start from around £25. You may think that this is an acceptable amount to pay for a quick loan, but you have to consider that your loan may only be for 10 days or less (a max of 30 days) then this makes the APR very much on the high side. Also if you do not clear your balance on the first pay day as agreed, and instead ask for a roll over then charges can really mount up.

Some examples for APR rates and loan repayment amounts are as follows:-

Customer 1 borrows £200 over a 30 day period.
Total amount repayable £250.
APR 1355%.
Customer 2 borrows £200 over a 15 day period.
Total amount repayable £250.
APR 22694%.

£29 per £100 borrowed.

For every £100 borrowed, you are charged a simple fee of £29.98.

How Much Can you borrow on a Payday Loan?

Often pay day loans will offer a £80 to £750 loan, and so if you wanted to take the full £750 on the above rates then you would be looking a paying back:-

Loan 1 £937.50.
Loan 2 £967.50.
Loan 3 £974.85.

Keep in mind that the repayment amount is the same even if you have the loan a few days or the full 30 days.

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Updated on 9th December, 2009

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