One of the most controversial things about payday loans is the interest that people attribute to it. If you think about it, all other types of loans have interest too - after all, that's how the financial institutions make money. That is why people who are in the market for loans use the interest rate as a measure of the feasibility of the loan. When it comes to payday loans, however, the interest rate - as many people see it - is simply exorbitant. But is it really?
If you take a closer look at the way payday loans are structured, you will realise that it is not right to consider the way payday loan providers charge their fees in the same way that we consider interest rates for conventional loans. In fact, when it comes to payday loans, we cannot really compute the charges in the same way as the APR is. They are not the same thing.
The truth is that payday loans lenders do not charge interest. What they do is they charge a fixed fee for every certain amount borrowed. So, for example, a person borrows Â£100. The payday loan lender could charge him anything from Â£15 to Â£20 for that amount, depending on the specific lender that he deals with. If he then borrows Â£200, he would be charged Â£20 to Â£25. Indeed, if you compute the APR, then the total interest would be astronomical! However, as I mentioned above, it simply is not logical to compute the APR because the very structure of the loan is different.
For one, it is a short-term loan. That means two things - the borrower can avail of his money in a much shorter period of time. This, of course, is a good thing, especially if the person is in dire need of cash. On the other hand, it can be viewed as restrictive as well as it means that the person has to return the money - plus the charge - within a short period of time.
There are alw ays two sides to a story. That is why, perhaps, many people misconstrue payday loans as being "evil" and "predatory." If you take a good look at the concept, though, you would certainly see that payday loans are filling a need in society. More so, payday loans make it easy for people in need to solve their temporary cash shortage.
Anyone who is at least 18 years old and a resident or a citizen of the UK can avail of a payday loan. All he needs is a computer that is hooked up to the Internet and he can take his pick from the countless payday loan providers in the market. He does not have to wait for a long time to get his cash and he does not have to go through a lot of hassle. In a sense, although payday loans can become a bit heavy on the pocket due to the charges, they still fill that need WHEN people really could use it.
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