The APR applied to payday loans appears at first glance to be high. This is very misleading, but there is a simple reason why this figure looks so high. APR is an Annual Percentage Rate, and as such is calculated over a whole year (365 days). However, a payday loan is taken usually only over several days or weeks.
The APR calculation was not designed to apply to very short term loans such as payday loans. It was designed to apply to long term loans in existence for a year or more. It is a theoretical figure than enables people to compare similar longer-term loan products, like mortgages or ongoing credit balances.
Rather than relying on the APR rate, it is more advisable to look directly at the loan agreement to see exactly how much interest you will be charged for the period of your payday loan. Some companies have a standard interest charge for the amount you wish to borrow regardless of the duration of the loan. It is then up to you to decide whether you will be able to repay both the cash advance you receive initially and the interest amount on the repayment date.
Many people do not have savings or access to credit cards or more traditional loans and so the convenience of a regulated payday loan provides peace of mind should the occasion arise that they need some money quickly.
If you need money in a hurry, cannot wait until payday and are confident that you can make the necessary repayments on the repayment date, this could be the ideal solution for you.
Overall, payday loans are convenient, easy to access and offer a viable option for people who require money quickly for whatever reason.
No doubt, Payday loan is the best solution for getting emergency funds. But it can be so risky in some situation. If you have caught in payday trap you can seek help for your payday loan consolidation.