Payday loans are quickly becoming the quickest growing most sought after loan type in the UK. The reasons for this growth in the market share that they are experiencing is the fact that they are very easy to arrange and fill a gap in the market place for short-term loans that can be accessed very quickly. In most cases the money that is applied for is released to the applicants on the day that they apply.
This makes them an ideal option when it comes to overcoming any short term financial problems that may arise in between pay cheques. You can borrow up to £750 which must be repaid in full when you next get paid.
Why do they receive so much bad press?
There are often articles in the newspapers claiming that the rates that are charged by the lenders for payday loans. The reason for this is the fact that they often use the APR charged as a means of comparison. This is not a valid comparison to make though it is like comparing the price of eggs to the price of cheese. The reason for this is the fact that payday loans are only taken out for a small amount of time (30 days at most), and not taken out for a year which is what the APR (Annual Percentage Rate) was devised to measure.
When you compare them like for like with the alternative products available in the market place the rates that are charged are actually very competitive. For example when you compare the costs to those that you might be charged for taking out an unauthorised overdraft and add to that the charges for every letter sent by your bank, there is no comparison. Also if you take out a payday loan you know exactly how much it is going to cost all the way through the process. The lenders usually charge a flat fee based on the amount that you borrow, which usually starts at £25 for every £100 that is borrowed.
Another similar product is the doorstep loan, where the lender calls around to collect your payment every week, which again if you compare the rates that this type of lender charges the payday loans come out far more favourable. It is very important that you do not roll the loan over for another month though, as you will be charged an extra months interest at the full rate. This obviously has a significant impact on the total cost of the loan. If you have to roll the loan over for another month you should repay as much as you can, as you are only charged on the amount that is outstanding.
So despite the bad press, you become the latest victim of a mid pay cheque financial crisis that can be resolved with a relatively small loan. You could do a lot worse than taking out a payday loan.
They are quick and convenient and so long as you pay them in full on your next payday they are also competitively priced.