Hour Payday Loans Blog

A small group of MPs within the Conservative / Liberal Democrat Coalition Government want the “legal loan sharking” of Payday Loans banned. But what will this really achieve?

In our opinion this will only encourage illegal loan sharks to target more vunerable families and individuals who reply on a valuable service provided by Payday Loan Lenders that work under the guidance of the Office of Fair Trading.

Online lender Wonga, for instance, quotes a typical APR of 2,689 per cent. But founder Errol Damelin says: “We are very selective about who we help.

“Our customers tell us they are choosing to use our short-term service over traditional alternatives of raising urgent funds, such as overdrafts and credit cards, because they know exactly how much it will cost and repay it quickly.”

He says that quoting high APRs to criticise payday lenders can be misleading because the loans are short-term while APRs are worked out on the basis of borrowing money over a year.

Damelin points out that the annualised cost of hiring a DVD would be £1,095, which is clearly a nonsense.

His view was supported by the Office of Fair Trading in June, when it gave a thumbs-up to the payday loans industry, saying the market worked “reasonably well” and there was no need to impose price controls.

Whenever anyone talks about any kind of loan, mortgage or any type of borrowing the most common question thrown into the conversation is: “What is the APR?”

This is perfectly normal as the APR (Annual Percentage Rate) has been given to us to be able to use as a tool to compare different financial products. But is it 100% reliable?

When I speak to people about borrowing I often tell them that the most important aspect of borrowing any money, whether a small payday loan or a large mortgage, is to look at your ability to pay it back. Basically, can you afford it? The APR on the “can I afford it” scale is irrelevant. If you cannot afford a loan that is 6% APR then there is no point taking it purely because it’s a “good APR.”

So, why are APR’s confusing? Take these 2 examples:

1. £300 borrowed over a 28 period with a Payday Loan could cost you £375 to pay back. When you need quick cash this may not be seen as an excessive amount to pay back.  However, the APR on this type of loan could be 2,000%+. Why so high? It’s because the loan is taken over such a short time-frame. As I mentioned before, can you afford to pay £75 in interest for emergency cash from a payday loan? You probably can. The APR, in my eyes, is therefore irrelevant.

2. A mortgage of £132,000 over 19 years at an APR of 3.9% would cost you around the £810 per month mark. As I mentioned before – your first question should be the affordability. Secondly, 3.9% APR is a very good rate for a mortgage in the UK currently. All the “APR hunters” would therefore be happy. However, over the 19 years the total amount paid back would be £52,000+ on top of the £132,000 borrowed.

You can see from these 2 examples in comparing a 2,00o%+ APR to a 3.9% APR it is very difficult. The term of borrowing the money changes the APR so much. In general, the longer you pay a loan over the lower the APR. However, as you are borrowing over a longer time period you will actually pay more interest. Clear as mud?

The general opinion amongst many is that the general public are not looking to borrow money as much as there were – but why?

1. Lack of available credit.

2. Too difficult to be approved.

3. Concerned about repayments due to worries about work.

These are the 3 main reasons given.

At Hour Payday LoansBlog we work with many internet companies that take applications from members of the public and try to offer them money – and we can tell you that the “thirst” or “appetite” for borrowing money is still there.

So, lets break down the reasons why feel they can not or do not want to borrow:

1. “Lack of available credit”

There is no point pretending that there is the availability of loans like there was pre-2008. That simply is not true. However, there are still lenders that have money that they WANT to lend to customers like you. Despite interest rates in the UK sitting at 0.5% (as of 19th July 2010) you still will not get a loan rate anywhere near that level – however there are some good deals still to be had. Payday Loans offer customers a great way of borrowing up to £1,000 until next pay day and although the APR is not attractive (APR is over a year… Payday Loans over a few days so they are not really comparable) they generally work out as £25-£30 interest for ever £100 borrowed. If you need quick cash then this is a small price to pay.

2. “Too difficult to be approved”

Again.. I will not pretend it is easy to be approved finance. However, it is not as difficult as many people are led to believe. Many people believe that their credit rating is worse than it is and they simply cannot get any unsecured, payday or secured loans.

Many websites offer simple application forms to get you quotes so it is worth shopping around to see what you can find.

3. “Concerned about repayments due to worries about work”

This concern is a good concern to have – as nobody wants to miss payments on the money they owe. It is important to know 2 things really. Number 1, a lender will not lend to you if they feel you cannot pay the loan back. Number 2, think carefully about your stability in work and the ability to continue repaying - you are the only person that can be the judge of that.

To answer the headline of this post… nobody ever WANTS to borrow money… nobody WANTS a loan. People WANT what a loan can give them whether that is a new car, home improvements, fixing a washing machine or reducing your monthly payments on other commitments.

HourPaydayLoans and TodayLoan are delighted to announce not only that they are working side by side but also with their association with Lead Affinity.

Lead Affinity is building a network of websites giving their customers the best chance of being approved a Payday Loan in the UK.

Simply put – if you apply for a loan with a company that is associated with Lead Affinity then you’re in good hands.

Take a look at this video describing the basics of applying for a payday loan:

Payday Loans on YouTube

Welcome to a new, fresh and exciting blog that will keep you updated with the world of finance in the UK.

Clearly, due to the title of this blog, we do have an interest in the UK Payday Loans market but we will also be looking at Mortgages, Debt Management, Unsecured Loans, Homeowner Loans and Secured Loans so you know exactly what is available in the market place right now.

Payday Loans from Hour Payday Loans