If you’ve done any research into payday loans, you will soon come across a pretty prevalent opinion that payday loans are dangerous. That they prey on poor people. That they are exorbitant and should probably be banned. Is that true though? Well, as a payday loan provider, Payday Loans UK is bound to say that it is not. But just because you’re paranoid doesn’t mean you’re not being followed, and just because someone has a stake in seeing something a certain way doesn’t mean they are wrong. It’s all about the evidence and the arguments. So judge for yourselves.

The interest rates on payday loans are not dangerous, as long as the loan is paid back on time.

The main point of contention when it comes to payday loans is the seemingly high rate of interest. If you are new to payday loans, then it probably will be a shock to see the APR. You might even wonder if it’s a misprint. Surely it can’t be that high? Well, it’s not a misprint but also, the interest rate is not really that high. This requires some explanation.

The APR rate, as you probably know, stands for the Annual Percentage Rate and refers to the amount of interest that you pay on a loan over the course of a year. With bank loans and other forms of long term loan, it is a useful guide to show how expensive a loan is going to be so that you can judge it against other loans. But the thing about payday loans is that they are not like ordinary bank loans. If you can get a bank loan as quickly as you can get a payday loan, then that will be the best thing for you to do. You’ll get a “reasonable” APR rate and the loan will end up costing a very small fraction of the loan amount, probably not even a pound, because you will be paying it back so soon. Try to get a loan like that from a bank, and all we can say is good luck. Because it’s never going to happen.

Banks don’t approve loans quickly, they take a long time. They also expect you to pay back the loan over a long period of time. That’s how all the interest payments rack up, so that they can actually make some money by offering this loan. The best a bank will be able to do in the short term is offer an unauthorised overdraft. And if you extrapolate all the charges from them, you will find that the APR is not in the thousands of percent, it is in the millions of percent or tens of millions of percent every year. The point is, with short term loans, meant to be paid back over a month, it is entirely unfair to use a measuring device that is used for loans that take years to pay back. In fact, at Payday Loans UK, the actual amount of interest you will pay for a payday loan is about the same, if not less, than you will pay for a normal bank loan.

So are Payday Loans Dangerous? Absolutely not, they are just perceived from the wrong perspective. But don’t take our word for it, look into it yourself and decide which perspective is the most fair.

Tags: APR, apr rate, bank loans, interest rates, longer term loans, Payday Loans, Payday Loans UK, short term loan, unauthorised overdraft

Written by sSeaborn

Samuel Sandrock has a degree in Economics and is an expert in financial matters. He likes listening to country music and playing squash.

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