Payday loans are short term financial solutions for emergency funds to anyone in need. This could be due to repair work in your home or car, it could be to pay for emergency utility bill; it could be for anything which would be more expensive not to seek payday loans.
Now, because payday loans are short term financial solutions, they are meant to be repaid on the next paycheck. Seeing as you can apply for funding between £ 50 – £ 1500 (varies on the lender), you are expected to pay back the money you borrow pretty soon.
For companies payday loans to cover themselves, the interest rate is usually quite high. Provided you meet the criteria for loan payday loan, then you can have the money to your account with an hour in some cases. Lending criteria usually means more than 18, have jobs that pay at least £ 500 per month, have a bank account and have a good credit rating.
As long as you meet these requirements, and thus be able to pay back money on your next paycheck, then lenders will believe they can trust you and will lend money. This is what makes today different from the loans to pay loans you can get from the bank. Loans from banks are very specific with who they can or can not lend to and are able to lend money for a long period of time. As a result they have a low APR or Annual Percentage Rate attached to it, for example it could be around 8.9%.
With payday loans the APR that is applied is much higher, the average was about 2000%. The reason these loans have higher interest rate attached to them is because they only have to be used as a short-term financial solution. If you can not ask for a loan period that you want you to (which usually only be up to one month, but can be up to 39 or 40 days depending on the lender), then you usually only be allowed to borrow money until your next pay check.
What this means in actual monetary terms is that if you borrow £ 100 for one month, there is a very good chance that you will pay around £ 135 pounds back. The longer you borrow money for, the more you will pay.
If you are looking to pay back your loan more quickly, then it’s a good idea to check with a lender. Most payday loans companies calculate interest paid on the payment date you have given, and not every day. Also you get charged extra early repayment, but do check with your lender to determine whether they can and procedures involved.
High interest rates on the type of loan is often seen some negative press, but it is in the interests of creditors (sorry pun) to put on a high level, because these types of loans can be borrowed by people who work the most. If you need short-term financial situation, then this is a great solution.