Payday loans often get  bad press.  People point to the high APR rates and say that it is exorbitant, that they are taking advantage of people on low income with a history of bad credit and sticking them with loans that they cannot possibly repay.  In fact, nothing could be further from the truth.  The point about the APR is that it is the annual percentage rate.  Well, payday loans are not supposed to operate annually!  You are supposed to pay it back on your next payday, hence the name.  And at Payday Loans UK, along with most other payday loan providers, you have to be getting a monthly salary to qualify.  This means that by the time you pay back the loan, you will actually be paying less for it than if you had taken out a loan at a lower rate of APR over a longer period of time.

In loans, timing is all important

Imagine that you loaned someone one pounds at thirty one million, five hundred and fifty six thousand, nine hundred and twenty six percent APR.  That works out at an interest rate of one pound every second.  Well, if you waited a year to pay it back, that same huge figure is what you would have to pay back.  Doesn’t seem like a good deal.  If you only waited two seconds to pay it back though, the interest would only be two pounds, so you would only have to pay back three.  On the other hand, if you took out a lone at a measly one hundred percent APR but had to pay it back over five years, you would end up owing an interest of five pounds, having to pay back six pounds altogether.  So which is the better deal?  Well, if you want to pay your pound back over five years, the second one, but if you only need a loan for two seconds, the first one (assuming the second one is not being offered over the two seconds).

Of course these figures are highly exaggerated, but it is to make a point.  Now, if you are taking out a payday loan but do not intend to pay it back with your next paycheque at the end of the month, it obviously is not a good idea.  That, however, is the fault of the consumer not the provider.  At Payday Loans UK we do not encourage people to take out loans that they cannot afford.  In fact, although the checks are minimal, what is tested is that you have the ability to pay it back with your next paychecque.  You have to have a job that pays monthly above a certain rate, and you have to be in permanent employment.  So you need to have the means to pay it back before we will loan you the money.

What we are not concerned with is whether you were able to pay loans back in the past, we do not check your credit history.  And why not?  Because bank loans work in a different way.  They rely on you being able to pay back a loan over a matter of years.  Will you still have a job next year?  Hopefully, but who knows?  Perhaps the company you are working for will go bankrupt, or maybe the building will burn down.  Perhaps you will fall ill and be unable to work.  The ability to ascertain whether you will be able to pay back a loan over a matter of years is not easy.  But there is far less chance that you will lose the ability to work in the next month.

The fact is that with payday loans you will normally end up paying quite a bit less paying back within the month than with a bank loan paying it back within years.  That does not mean that one is better than the other, it just means that they do different things.  If you need a long term loan, then you will have to use a bank.  But if all you need is a short term loan and the bank won’t give to you for whatever reason, then Payday Loans UK is here to help.

Tags: ability to pay, bank loans, father time, Payday Loans, Payday Loans UK, time

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Ken Heading keeps up to date with all the financial news in the UK, particularly as it affects payday loans, and enjoys writing on this subject.

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