There’s no doubt about it when you’re in need of cash straight away, you’re willing to accept a bad deal and pay some high fees and taxes for it too. You’ll sort it out later, you’ll find a way, or at least that’s what you tell yourself.
When it comes to payday loans UK, understanding the fees and rates you’re likely to get is mandatory. Sure, payday loans are ideal for emergencies or expenses that just can’t wait, but you still need to do a bit of homework upfront and ensure you get a good deal.
All in all, this article will explain the potential fees associated with this type of loan.
Considering the APR
The APR is higher for a personal loan than any other type of loan. It can easily exceed 1000%. For example, if you get a loan at an APR of 1250%, you’ll be paying 0.8% extra per day. This is the cost you’ll pay for the service.
Now, the good news is there are some caps. Different countries and states have different caps.
If you borrow $100 for a month at this rate, you’ll pay back about $124. On a monthly basis, it’s not a fortune. Of course, the more you borrow, the more you’ll pay back. That’s why payday loans are meant to be short-term, so you should be able to repay everything when your next paycheck comes.
Compared to other loans, the APR of Payday loans is much bigger. Credit cards would give you about 20%, while personal loans would normally cost you less than 10%. However, they’ll normally expand over longer periods of time. Plus, you might be rejected if your credit score is low.
After all, payday loans don’t take credit scores into consideration.
Why are payday loans more expensive? They’re urgent. Plus, there’s no collateral involved, so you pose a risk to all lenders.
Whether you apply to different loans yourself or you simply use one of those portals to find the best deals, most of them will be sorted by the APR and overall cost involved. Again, this is the biggest expense associated with a payday loan.
How about processing fees?
Processing fees are also quite common in payday loan companies. In fact, many lenders charge such fees, even those dealing with personal loans or perhaps title loans. Even if you get a mortgage, you’re likely to pay a processing fee.
Processing fees are usually small and can be blended into the actual loan, so you shouldn’t pay anything upfront. If a lender asks you to pay any fees upfront, simply look for a different deal.
Late fees kick in as soon as you miss the payment. When getting a payday loan, you’ll be asked how long you need it. It could be a week or perhaps four weeks. Make sure you select the date after you get paid, just to avoid any potential problems.
Failing to pay before the time limit will increase the price of the loan.
You may also be charged a fee if there isn’t enough money in your account and the lender tries to take it. The NSF (Non-Sufficient Funds) fee is separate from the late payment one. Such fees will usually go around 10% of what you owe, but each lender has their own rules.
Rollover fees apply when you face difficulty repaying the loan. Depending on the agreement you get, you might be able to get a rollover, meaning you’ll get another time frame to repay the loan.
In such cases, lenders will most likely charge you the fees associated with the loan, even if you can’t pay the actual loan.
A rollover is a convenient option if you struggle with money, but it won’t come free.
Bottom line, these are the most popular fees and taxes you’ll have to pay when getting a payday loan, with the APR being the most significant one. It can make the difference between a good deal and a terrible one.
The good news is apart from the APR and processing fee, pretty much any other fee can be avoided if you repay your loan on time and avoid default.
The bad news is you can’t avoid the APR, which is basically the cost of your loan. As for processing fees, they don’t really mean anything, but lots of lenders rely on them to increase the price of loans.
Any other fees should be avoided. It’s irrelevant to pay useless fees when you can simply find a cheaper lender.
No matter who you choose for your payday loan, make sure you go through all the terms and conditions associated with the law. Ideally, you shouldn’t need to worry about any fees and rates that might kick in later, but unexpected situations may arise when least expected.