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Payday loan calculator: Understanding the costs
You are considering taking out a payday loan but you are not sure whether or not you can afford it. You also don’t know the different fees and charges when availing for this type of credit and you want to make sure that you can make the proper payments at the exact agreed time. Indeed, the cost is an important factor that anyone should look at when applying for a payday loan. If you want to know how much you are going to pay for a certain amount of credit, using a payday calculator would do wonders.
The loan calculator
Nominal Interest Rates and Annual Percentage Rates (APR) are some of the terms that you might encounter when taking out a payday loan and for an ordinary person, the true meaning of these words can be downright confusing. Many online lenders, however, provide customers with a helpful interest rate and APR calculator that will help provide clarity on the matter. All you need to do is to enter the amount of loan that you wish to take out, the amount you will pay each month, and the number of months in which the loan will be due and you will get an accurate number of a number of costs you will have to bear. In general, the calculator will help you work out:
- The total amount of fees you will pay.
- The total amount of cost you will incur in taking out the loan.
- The total amount of repayments you will make.
You might ask what kind of formula a calculator for payday loans use and the answer would be varied depending on the lender and the type of calculator they provide to their customers. There are calculators that utilize the Newton- HYPERLINK “http://mathworld.wolfram.com/NewtonsMethod.html” Raphson HYPERLINK “http://mathworld.wolfram.com/NewtonsMethod.html” method and the like to calculate the interest rates. However, whatever method it may follow, calculators are typically easy and straightforward to use and you would get an accurate figure of the actual cost without much help.
The Reason Behind Payday Loan Rates
Normally, people would be hesitant to take out payday loans primarily because of the cost of the fees. Taking out a £100 payday loan would typically charge you £35 or a 35% in interest rate – something that you just won’t see in other forms of credit. However, payday loans are short-term loans which mean you will just have to pay the interest rates once, usually in your next payday, and after that, you are relieved of any form of payment. Installment loans, on the other hand, offer much smaller but recurring interest rates that you will have to pay every month for a year or so.
Also, if you consider the fact that payday loans are unsecured (they don’t require any form of collateral) without credit checks, all the risk rests in the lender. Thus, on the part of the lender, putting a hefty interest rate in their services would justify the huge risk that they are taking. Lastly, taking out a payday loan is so quick and easy – requirements are minimal and payouts can take less than 24 hours to accomplish, that many people are just willing to take it despite the costs.
Why Payday Loans Use Annual Rates
You might ask why the cost of payday loans are measured annually through the APR when it would only require you a month or two to pay back the interest rate? This is because payday loan lenders are legally obliged to show the APR when they advertise their loans. This simply means that the APR is not an accurate measurement in displaying the actual cost of taking out payday loans. An APR of 400%, for example, is simply misleading because there is no such thing as a payday loan that takes a year to pay out. Nevertheless, the APR is only used as a standard for comparing different credit offers but not the actual figure of costs that you will bear once you take out a payday loan.
Comparing the Costs
The payday loan calculator will also allow you to compare different costs from different payday loan offers. Here are some of the things that you might want to consider when choosing a product from a payday loan lender.
Annual rates are huge but the actual cost in taking out the loan is low
Customer service must be as quick as the application process itself
There are no hidden fees and charges
So before you take out a payday loan, keep in mind that you can use a calculator to measure the exact costs that you will have to bear. This way, you will know whether or not the loan is ideal for your financial situation. Affordability is an important factor that you must always consider when availing for a payday loan especially if you want to avoid suffering the possible costs of missed payments.
A View of Our Competitors
Representative Example: £400 loan for 113 days (4 instalments). Total: £597.48. Interest £197.48. Interest rate 255.5% pa (fixed). Repay £149.37 for 4 payments. Representative 939.5% APR.
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5 most recent personal loan reviews
Easy form to fill in and understand. Well explained rolls of the guarantor and the person getting the loan. Easy to follow terms and conditions . When you talk to the staff very polite well mannered. Quick pay out of the funds into my account.
Review posted by Dawns Evans, Leicester
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As the guarantor it took about 15 mins to finalise all my details. Very simple questions and the operator was very friendly and helpful advice that was given was extremely helpful. All in all I would recommend Fairmont Finance to anyone . Although the interest is very high it seems a standard rate across other companies.
Review posted by Paul Hutchens, Blackpool
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I would definitely recommend PDLN loans to anyone who's looking to take out a loan. They provide excellent service, the staff are very friendly they kept me updated threw the whole process. I received a text saying Loan will be in my bank in 48 hours but was in 2 hours later so very fast payout.
Review posted by Jamie Roberts, Yeovil
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Loanvy is a licensed credit broker and not a lender.
We will never charge you for our service and the lender will not increase the rate to cover our fee to them.
We work with over 40 different lenders to bring you the very best rates from across the UK market.
Representative 305.9% APR. Representative example: £400 borrowed for 90 days.
Total amount repayable is £561.92 in 3 monthly instalments of £187.31.
Interest charged is £161.92, interest rate 161.9% (variable)
Warning: Late repayment can cause you serious money problems. For help, go to moneyadvice.org.uk.
Do not borrow more than you can pay back as defaulting on payments can lead to serious monetary problems.
Any collateral you have against the amount may be at risk of repossession.