Submitted by: Tom Dawson

Most of us at one time or another will encounter a short-term financial situation that needs the injection of some cash to resolve. Previously we would probably have got hold of our bank to overcome the problem. Unfortunately this is not now an option for a great many people. So what are you to do now, if your car is in need of repair and you have not got the money to repair it? This is where payday loans come in.

A payday loan is a short-term loan designed to overcome short-term problems; they are available for amounts from 80 to 750, although the first time that you take out a payday loan you may be restricted to borrowing 400. The loan is repaid in full on your next payday. The lenders charge a flat fee of 25 for every 100 that you borrow, which means that you know exactly what the loan will cost you to repay. There are also no hidden costs and no admin fees. You can also get the money paid into your bank on the day that you apply, quite often without the need of any faxes or post, although in some cases where the lenders are unable to confirm your details automatically the lender will request that you fax in some simple documentation to prove you are who you say you are.

Most of the lenders operate a responsible lending policy which means that they will only lend to people who can afford to repay the loan, To ensure that they do this all customers are assessed to make sure that they are who they say they are and they have enough income to cover the repayment. Also the lenders do not target people with debt problems. All customer contracts and any communications are clear and transparent. Also the lenders will not lend to anybody if there is any question whatsoever about their identity or authenticity.

So why do payday loans get so much bad press?

The main reason that payday loans get so much bad press is because they are quite often misunderstood and compared to products that do not work in the same way. The main reason for this is the fact that the lenders have to display their rates expressed as an APR (Annual Percentage Rate). The APR is the interest rate and any other charges expressed as an annual interest rate charge. The use of an APR is a useful way of comparing similar products but is not quite so effective when it comes to comparing different products.

See the table below which should make it easier for you to understand this;

Type of Loan Amount Months Total Repayment APR Interest Charged

Installment 500 36 653 19.9% 31%

Installment 500 60 766 19.9% 53%

Payment 500 1 625 1737% 25%

As you can see from the table above the APR for the two instalment loans are exactly the same yet the amount repaid and the actual interest charged expressed as a percentage of the amount borrowed is significantly different. They both also cost much more than a payday loan yet the APR indicates a totally different story.

So if you need a small amount of cash to overcome a short-term financial issue ignore the APR and look at what the loan will actually cost you. You will then see that a payday loans is in fact a very competitive option indeed.

About the Author: Tom Dawson is a UK finance expert offering help and advice for all types of personal loans including

payday loans

and

instant cash advance loans

. Why not visit his site today?

Source:

isnare.com

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