Payday loans have been the new face of predatory loans and high-risk loans in UK. This is because the average interest rate for a payday loan can be as high as 600% and it’s only 391%.
If you don’t have the funds to repay the loans, which estimates is 80% of payday loan holders aren’t able to pay back in the given time frame, the interest rate rises and the amount owed increases making it almost impossible for you to repay it.
Although you may believe a payday advance is the only way to pay an emergency bill or cover another debt, the truth is that a payday lender will ultimately end up costing more than the problem. It will cost you more than any late fees or bounced checks fees that you are trying to avoid.
Compare payday loan interest rates between 391%-600% and the average rate for alternatives like credit cards (15%-30%) or financial management programs (8-10%); personal loans (14%-35%); and online lending (10%-35%). Are payday loans worth considering?
Understanding the ramifications of payday loans is important before you jump at this quick and very expensive loan.
What Does A Payday Loan Work?
Payday loans offer a quick solution to consumers in financial crises, but they can also be costly for families and individuals.
How Does A Payday Loan Work?
The registration form can be completed at a local payday lending office, online or by the consumer. The only documents required are identification and a recent payslip.
The law in your state may allow you to borrow between £50 and £1,000. If you’re approved, cash is sent to your account immediately. You can also apply for online 50 cash loans.
The borrower is responsible for full payment by the next payday. This is typically two weeks.
Borrowers have the option of either putting a personal check on hold to coincide with their next paycheck or allowing the lender to take the money out immediately.
Payday lenders typically charge interest at £15-£20 per £100 borrowed. Calculated on an annual rate basis (APR). This is the same as for auto loans, credit cards and mortgages. The APR for payday loans ranges between 391% and more than 521%.
What If I Am Unable To Repay My Payday Loan?
Depending on where you live and what lender you choose, you may be subject to a late fee. A rollover option may allow you to extend the due dates, but this typically comes with a fee. Failure to obtain payment may also result in bank fees.
If the lender is unable to collect the funds, you can send your loan to a collection agency.