So, an APR that is given for a loan will show you how much you will be charged on an annual basis including all of your costs such as the interest charged on your borrowing and any fees or costs that will/may be applied. This is a useful way for consumers to compare loan products before they choose the cheapest one for their needs.
Why is the APR on pay day loans higher than other loans?
The APR on a payday loan will look higher than that given to a standard personal loan. This is, in part, due to the fact that a pay day lender does not take any security from their customers to guarantee their loans and they often lend money to people with bad credit histories. So, as with any lender that offers unsecured loans or loans to people with bad credit their charges will be higher. This is standard practice in the lending industry.
But, it is actually quite hard to compare the APRs on a standard loan and a pay day loan as they are both really designed to do two different things. This is kind of like comparing the mileage on a car and a motorcycle rather than on two cars. A car and a motorcycle will get both you from A to B but they don’t really do the same things for the same people necessarily.
Does the APR on a pay day loan really matter?
The APR is just one factor to consider here. At the end of the day it is wise to remember that a pay day loan is not designed to last for a year whilst a personal loan may run for a lot of years so the APR is maybe more important there.
Most of our customers at shortloans.co.uk will pay their pay day loan back within 31 days of getting their cash because this is the whole point of a pay day loan. This kind of cash advance is designed to give you access to smaller amounts of money that are repaid come your next payday. Handled sensibly, you shouldn’t still have your pay day loan a year down the line in any case which makes the APR redundant in many ways.
So, the APR may not have any impact on you at all. Our pay day loans come with a simple flat fee structure. So, for example, if you borrow £100 then you’ll pay us a fee of £25. That is the figure you should really be considering in this case scenario.
So, if you need a small loan fast but you donít need it for long then a pay day loan may be the lending solution that will suit you best. To find out more about how payday advances could put money in your pocket when things get tight, contact shortloans.co.uk.