Why Wage Day Advances Are So High-priced

By Author: Martin Sumner
Total Articles: 432
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Wage Day Advance Loans can be an extremely handy service for those who have a desperate need for speedy funds to get them through until their next salary arrives. Whether this is because of a cashflow problem, or an unpredicted bill, cash advance loans can help bridge the shortfall.

Cash advance loans come at a cost though - and it's a large one. Cash advances are widely regarded as one of the most costly forms of legal borrowing out there, with huge rates of 1000% or more common. Just why are the interest charges so inflated?

The first consideration to point out is that cash advances are taken up over a short period, while the regular APR measurement of interest charges is intended for measuring how much interest would be charged over a full year. As next to no pay day loans are taken out for this long, APR figures are maybe not the optimum way of quantifying how costly they are in real life situations.

All the same, the charges are sizable. You're paying for convenience and speed, as most of the time the cash can arrive in your bank account within a day, and also because of the lack of credit history checking ...
... you're also in some senses paying for the chances taken by the loan company who may lend money to individuals totally unable to repay it.

You're also paying a higher amount because the finance companies recognize that individuals who need funds pressingly are happy to pay more than those searching for longer term borrowing and are prepared to shop around for a good rate.

It is this last reason that is the crucial one payday loans are so pricey - as a group, payday loaners acknowledge that they are the last option available for borrowers, and so can afford collectively to charge extreme prices for their undoubtedly popular services.

About the author: Martin writes for http://www.ukpayday.co.uk/ - your source for fast cash advances in the UK