Payday loans have been big business in the USA for many years and are common place alongside credit cards and mortgages.
The idea is ‘quick cash’. Small loan amounts for short term borrowing.
The name ‘Pay Day’ suggests a ‘loan until payday’.
You take out a small loan of up to £1000 and you pay it off in 30 days or when you get paid.
Not a bad idea if you can’t get an advance from your boss and you need some emergency money but beyond that, these kinds of loans can be dangerous.
Now being advertised in the UK, pay day loans with a typical APR of 2339.30%
No, I did not just mistype, that is the real figure.
The cost of borrowing £250 for 30 days is £75. That’s 30% of the original loan value in just 30 days.
But you can extend your loan…. You can repay it over a longer period by just telling the loan company that’s what you want to do.
At a rate of 2339.30% APR, that is suicide.
I’ve got a basic loan calculator on my other site and if you put the figure of £250 for 12 months at a rate of 2339.30% APR, the total amount repaid over 12 months is £5848.26.
£5848.26 for a loan of £250….
Seriously people, only get one of these loans if you can pay it off quickly and even then think seriously about the value for money you’re getting and if it really is worthwhile…
If you borrowed the same amount from a mate and they tried to charge you that much, you’d laugh!