Payday Loan Fees

There is a large stigma attached to payday loans when it comes to the fees. A wealth of misinformation suggests that this type of loan has spiralling, uncontrollable interest rates liable to land the borrower in masses of debt. However, in reality payday loans are subject to the same monitoring and regulations as any other financial service and have no hidden charges.

The companies which provide payday loans are obviously businesses, and must have some kind of fees in order to survive. Just try asking your bank for additional services and see how willing they are to offer them for free! And that’s even if you’ve been a loyal customer for a long time. In fact, Fido Payday avoids lenders who charge an admin fee to set things up and sticks with a flat fee of £25 per £100, no matter how much money you apply for.

The Truth

Many people avoid payday loans because of the fear of interest rates that will result in them never being able to pay the money back. Stories abound which suggest this is the case. However, these stories are not applicable to modern lenders, who are subject to strict financial regulations. Sure, this might have been the case many years ago with backstreet loan sharks, but things have moved on a lot since then and it does payday loan companies a massive disservice to conflate the two.

The thing which muddies the issue is that APR rates are indeed high on instant cash advances, particularly when compared to regular loans. However, this is because APR rates are spread out over an entire year, which is not the period payday loans are meant to be paid back within. Payday loans are intended to be paid back over the course of a few weeks, a month at the most, whereas the average high street loan is designed to be paid back over a longer period. It is disingenuous to assume the two rates are comparable. In this situation, short term loan rates come off as highly excessive, while the reality is that if they are paid back in a sensible timeframe, they are not.

A Real Alternative

In fact, when short-term loans are paid off in the timescale agreed, the interest is low. It is only when stretched out to unrepresentative periods that it seems high. In normal circumstances, it works out cheaper than overdraft charges and other common banking fees.

It should also be noted that these businesses are not charities and they are risking a lot by providing unsecured money to borrowers without any credit checks whatsoever. They do not have vast sums of wealth to back them up and without high interest rates, they would find themselves in an extremely precarious position. Indeed, the interest rates are necessary to ensure that people do repay their loans quickly.

So, that is the truth about payday loans. They are clear, simple, easy loans with no setup fees and highly competitive rates when paid back within a reasonable timescale. They are cheaper than bank overdrafts and they guarantee there are no secret costs hidden deep in the small print. As a source of emergency funding, surely they deserve a little consideration?