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Comparing Fast credit alternatives based on APR

It happens more often than not that we are found short of money in the middle of the month, the crisis appearing in the form of auto repairs/home repairs, health care and medical expenses, unplanned shopping expenses, birthday/wedding party expenses, replacement costs of repaired appliances etc. People who have not planned for these expenses turn towards fast cash options like credit cards, payday loans or overdrafts. The question here is which of the options is cheaper, effective, faster and more flexible as compared to the others.

Payday loans are short-term loans repaid on the next payday. However, there has been a persistent argument against the high APRs charged in comparison to other loans and the unreliability of payday lenders (that they hide fees and mislead consumers). But when you consider the fact that quick payday loans are short-term in nature and require no collateral, the high APR is not of much consequence. The triple digit APR of payday loans is mostly misrepresented, since the actual fee charged is usually 25 pounds per 100 pounds borrowed and payday loans are not annual loans. 

 

The APR (Annual Percentage rate) is the cost a customer has to bear over one year. APR should include not only the interest rate, but also any annual fee. But in reality APR is a complicated formula, which can confuse the borrowers by not including any balance transfer fees on credit cardsor any payment protection insurance. And the tricky part here is that if you have 0% on purchases, but you also have some cash withdrawn, the lender will put the monthly payment towards the purchase debt first.


For Overdrafts, another form of short-term credit, the APRs are consequently high, but it may not work out too expensive if you clear the debt fast. Tim Moss, head of loans and debt at Moneysupermarket, said: "If I lent you £25 last Friday and you paid me back this Friday, you might buy me a drink to say thank you. If the drink cost £1.50, it would translate into an APR of about 3,600%, which is obviously a meaningless way to look at the cost of the credit."


According to a research conducted by CFSA (www.cfsa.net), payday loan fee is lower than many of the alternatives in the market (US).

 

(For $100, 14 day term)

Fee

APR

Overdraft protection fee

$29

755%

Credit Card late fee

$37

965%

Payday Loan (internet)

$25

652%

Bounced checks/NSF

$56

449%


But the real fact is that some customers take the easy option available than to compare the price of a payday loan with the alternative. With some time to spare to make a cost analysis over the budgeted amount and your repaying capabilities reduces the burden a lot.


UK Source :http://money.uk.msn.com/loans/articles.aspx?cp-documentid=148835411
US Source : htttp://www.cfsa.net

 

More

  1. Know how quick payday loans work?-UK Quick Loans Article
  2. Are no faxing payday loans available to Everybody?-No fax payday loans Article
  3. Checklist before taking fast payday loans. -Britain fast Loans Article
  4. What Online Payday loan lenders in UK Charge-Lending Pounds Page

Summary

Comparing Fast credit alternatives based on APR

People who have not saved for unplanned expenses turn towards the fast credit options like credit cards, payday loans or overdrafts. The question here is which of the options is cheaper, effective, faster and more flexible as compared to the others. The argument will also be on the high APRs charged over other options and the unreliability of lenders, who may hide fees and mislead consumers.


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