With the high interest rates and short terms, it is common to think that payday loans only benefit the lender. That is not the case. Borrowers are able to benefit by taking out payday loans in ways that they would never benefited from credit cards, overdrafts and personal loans. Here are just three ways that you will benefit as long as you borrow sensibly.
Lower Fees and Interest Rates
Looking at the APR, you may be surprised that some companies have an APR of around 4000%. However, this is the annual rate of interest and not the small fee that you will pay for the short term of the loan. Payday loans are typically for just until the next payday and the lenders set fees for that term, typically around £30. When compared to some unapproved overdraft fees and payments for some credit cards, the extra amount you pay for the money is much less.
Shorter Term to Get Out of Debt Quicker
While credit cards, store cards and overdrafts give you the option of borrowing over a longer period of time to lower your monthly payments, they increase the amount of time that you are in debt. You may be tempted to only clear the minimum payments, which lead to more interest being added on. It can lead to struggling to get out of debt. The short term of a payday loan means that you are out of debt quickly – there is a set date that you agree to stick to – and you only pay the fee agreed upon lending.
Shorter Terms Mean Less Interest
For those worried about the fees, many company set a sliding scale. Payday loan companies reward borrowers who pay back in a shorter time by lowing the fees due. For example, a loan taken for 31 day could cost £100 extra but for just one day it would cost £3 extra. This is something that mainstream lenders are unable to offer and often set an early repayment charge to cover the amount of interest that they lose out on by paying back early
There are risks to taking out payday loans but they offer people many benefits. The short term helps to get out of debt quicker and leads to fewer fees being added; borrowers even save money by paying back early. However, it is important to borrow sensibly and only take the money that you need and can afford.
The Pay Day Loan Company offers short term loans to those who need them. Borrowers can borrow as much or as little as they need for the duration that they need, where the interest changes based on the term. For more information, visit http://www.paydayloan.co.uk.
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