If you look up instant payday loans in the press, not very many people have very many positive things to say about them. There seems to be a bit of a bandwagon at the moment and everyone is keen to jump on it, from journalists to MPs, everyone is keen to tub thump about high APRs, suggesting that a high APR makes payday loans an unsound financial move. But APR is a wholly inappropriate measure for instant payday loans, the idea that APR should be used to measure the cost of a payday loan or that a high APR means payday loans are not a useful financial tool are both equally misguided.
Payday loans are intended for use when users need money quickly, for instance a utility bill is overdue and you face being cut off, a credit card bill is due and you face late charges, a cheque is about to clear and you would face unauthorised borrowing bank charges.
Similarly payday loans are intended for when users intend to pay them back in the near future. Payday loans are never taken out for more than a month; multiplying the interest charged to show how much it would cost to take the loan out for a year, therefore, is nonsense, it will never happen.
The best way to determine whether a payday loan is the right tool for your situation is to compare the cost of taking out the loan with the cost of not taking out the loan. For instance, taking out a £100 payday loan for one month would cost around £25, if you compare that with the inconvenience of having your electricity / gas / telephone cut off plus the cost of huge reconnection fees then a payday loan looks like a sound financial decision. Similarly being late with your rent or mortgage payments can not only cost you money but also have a serious and hugely detrimental ongoing impact on your credit rating and your ability to buy or rent a house in the future.
Your financial need doesn’t have to be quite as serious as this though for payday loans to still make financial sense. For instance the end of season sales saw many shoes, coats, bags etc. marked down by well over £100, taking out a payday loan, which might cost £25 or £50 to save £100 or more makes sense, you still save money overall. A payday loan allows you to buy your dream boots now while they are in the sale but pay for them in a couple of weeks when you get paid.
Instant payday loans are a specific tool for a specific purpose, they are intended for when you need money quickly and can pay it back quickly, they offer money to consumers regardless of your credit history, and they offer it without a lot of fuss or form filling. If you need money now and can pay it back at the end of the month payday loans are a great source of cash.