There are many people that would advise that it is a good idea to compare payday loans. However, even if you go to a comparison website, it can be quite tricky to understand what you are comparing and whether you are actually looking at the most important factors. There are many different features to a payday loan and many ways that different loans can vary. This means that it can actually be quite complicated, looking at how to compare them. To make it easier, we have come up with a list of features that you might want to consider when you are choosing your payday loan.
Representative Example: £400 borrowed for 90 days. Total amount repayable is £561.92 in 3 monthly instalments of £187.31. Interest charged is £161.92, interest rate 161.9% (variable). Representative 305.9% APR. We are a broker not a lender. We don't charge fees. We don't sell your personal information.
When comparing the costs of any loan, many people forget to compare the fees. These are the fees charged for taking out the loan. Most people will just look at the interest rates, but these fees can be very relevant, particularly when you are borrowing a small amount of money for a small amount of time. So when you compare payday loans, make sure that when you are looking at the costs, that you have the fees and the interest rates included so that you can really see exactly how much you will be paying back to the lender.
The interest rate is the figure that most people will use to compare loans. With a payday loan it can actually be less relevant as there are other fees and factors to consider as well. Obviously you do not want to be paying back more than necessary, but the interest rate may not give you a true figure. It is much better to calculate how much you will be paying back in real terms. You will find that payday loan websites will have calculators where they will let you know exactly how much you will repay and you can use this to compare rather than looking at a percentage rate which can be confusing.
If you do not repay a loan on time, then the lender will charge a fee and this is normally called a late repayment fee. These fees vary between lenders, they may have a one off fee, charge a daily fee and interest rate or something else. It is wise to be aware of what the fees of the lender you are choosing will be. This can help when you are comparing payday loans as if the costs are similar, then the fees could vary and make a significant difference to the cost of the loan if you are late in repaying.
It is important to look at how much you are able to borrow from different lenders. Traditionally payday loans will start at £100 and go up to £1000 but they can differ. You will need to think about how much you want to borrow and whether the lenders offer that amount. However, you may also need to approach the lender and see if they are prepared to lend you that amount as some may not, particularly if you have not used them before and you want a large amount.
It is well worth thinking about whether you can afford to repay the payday loan in just one instalment or whether several instalments will suit you better. Payday loans traditionally only have one repayment, but there are now lenders showing some flexibility. They will be more expensive though as the longer you borrow for, the more it will cost you. It could be worth it, if it makes it easier for you to manage your other finances and stops you having to pay a late repayment fee.
It is always wise to find out a bit about the lender. Payday loans tend to be offered by specialist lenders rather than mainstream ones so you may not know very much about them. It is wise to ask family and friends about the lenders, if they have used them or look online for more information. Look at their website and then see if there are any independent reviews of payday loans which you can use to find out more information.
It can often make a big difference if a lender can provide a really good service to the customer. If you have questions you need answering or need help with anything, it is reassuring to know that there is someone to help. You could contact their customer services department before taking out the loan to find out more.