Five Ways to Compare Payday Lenders

Payday loans offer a quick and convenient way for consumers to acquire short-term financial assistance.

While payday loan lenders do have many similarities, each lender is unique. As such, it is important for consumers to shop around for just the right payday lender.

Comparing Payday Lenders

There are five key components that consumers should consider when shopping for a payday lender:

1. What are the payday lender’s finance charges?

The most important question to ask yourself when shopping for a payday lender is how much the loan will ultimately cost you. The amount the loan will cost you is based on the finance charges assessed by the payday lender. Finance charges are often expressed as a specific fee per £100 loaned or as an annual percentage rate, or APR, which is essentially the loan’s interest rate.

Payday loan finance charges typically range from £20 to £30 per £100 borrowed. For example, if an individual borrows £200, he or she can expect to pay £40 to £60 in finance charges. Payday lender APRs generally start around 1200 percent, but some payday loan providers cite APRs as high as 9899 percent.

By comparing a payday lender’s finance charges you might be able to come across lenders who are offering deals on their finance charges, such as 50 percent off the first cashed cheque.

2. What is the maximum loan amount offered by the payday lender?

Payday lenders often have different caps on the amount of money they will loan. Loan amounts typically range from £100 to £750, but some lenders will provide loans in the amount of £1500 to qualified borrowers.

When shopping for a payday lender, you will need to determine how much money you need to cover your short-term expenses. Once you know this amount, you then can focus your search on those lenders who offers loans in that amount.

It is also a good idea to be conservative when obtaining a payday loan – payday loan customers often get into financial trouble when they borrow more than they actually need and then struggle to repay the loan.

3. What are the payday lender’s loan repayment terms?

The repayment terms for a payday loan outline how the loan is to be repaid by the borrower. Typically, a payday loan will need to be repaid in full, including any finance charges, by the loan’s due date. This due date is generally 31 days after the loan is secured.

Most payday lenders do offer borrowers the option to roll over their payday loan if they are unable to repay the loan by the due date. However, borrowers do need to pay an additional fee in order to extend the loan’s repayment period.

While the option to extend the repayment period might be helpful to the borrower in the short term, payday loan customers should be careful – rolling over a payday loan is what generally leads to the high charges associated with these types of short-term loans.

4. How convenient are the payday lender’s services?

One of the benefits associated with payday loans is their convenience – unlike other types of loans, borrowers rarely need to fill out a ton of paperwork and payday loans are typically processed within hours, if not minutes.

Additionally, the advent of online payday lenders has increased the convenience factor even further. Now, a payday loan customer can access quick cash with a few simple keystrokes.

5. What are the payday lender’s loan qualification standards?

Payday loans are known for having pretty relaxed qualification standards – however, there are still standards a borrower needs to meet in order to qualify for the loan.

Typical payday loan qualification standards include:

• Having a valid bank account with the ability to receive direct debit;
• Being at least 18 years old;
• Being employed and receiving a regular paycheque; and
• Being a resident of the United Kingdom.