There are lots of payday loans available on the market these days and it can be hard to know what the differences are between the different types of loans and what to look out for. If you have never used these loans then it can be even more confusing knowing what to choose. It is worth understanding what the differences are likely to be and this will help you to be more confident when you are choosing between them.
Many people will start by comparing the interest rate. They will look at the rate and they will choose the lowest one, thinking that this will be the cheapest lender. Although this might make logical sense, it is worth understanding that there are different ways to calculate interest rate. The APR is the annual percentage rate and this is the interest that is going to be charged. There are some lenders that will charge an AER this is an Annual Equivalent Rate which will not only include the interest but any other charges as well. This would be things like administration charges that all borrowers are required to pay. You can see that if you compared the AER for one with the APR for another it would seem that the first was much more expensive when it may not be depending on what the fees are for the other one.
Lenders will differ in what fees they charge and how much they are. Some will have fees for everyone such as administration or setup fees. These tend to be set amounts that are paid for once. There will also be charges for other things that will again change depending on lender. You may have to pay a fee if you want to repay the loan early, for example. You will also have to pay a fee if you are late to repay the loan or do not manage to repay the full amount on time. These fees can be pretty high, although there is a UK law which makes sure that they are capped so they cannot go too high. However, they will still differ between lenders. You may feel that it is not worth worrying about these because you feel you will repay the loan. However, you cannot be completely sure that you will and so it can be worth just looking at how much this will be. You might find that they will vary quite a bit between lenders and so it is worth comparing them. If two lenders are quite similar otherwise, this might be a difference that will influence you as to which to choose.
Cost is very often the biggest factor that we get concerned by when we are choosing a loan. This is not surprising as money is obviously a problem for us anyway which is why we are looking to borrow some. Obviously, we do not want to pay more than necessary for the money that we are borrowing, but we also want to make sure that we get good value for money too. This means that we need to think about whether there are any important factors that we need to consider when we are choosing a loan and a lender.
The first thing we need to establish is how much we need to borrow and then see which lenders can let us have that much. Payday lenders tend to lend between £100 and £1,000 so if you need more than £1,000 then this type of loan will not give you enough money. If you need an amount within this range, then you may still find that not all lenders will lend it to you. Some may not lend such high amounts to anyone. Some may only lend higher amounts to those people who have borrowed with them before. This is because they like to build up trust first and they will only lend smaller amounts to first time borrowers and then larger amounts once they are satisfied that they will be able to repay. This amount will vary between lenders.
You also need to think about whether there are any other factors that will influence your decision. Things like the reputation of the lender, what their website is like, how good their customer services are and all sorts of things like this. For some people, there things that are really important to them and there are other people that are not that worried. It is worth having a think about what might be important to you. If you have had a loan before you can think about your experience then or perhaps just your dealing with banks and building societies generally. This will be a very short term loan, so you may feel that you will not really mind about these issues but it is worth considering them as they could be a way that you can choose between the different lenders.