Payday Loans are quite often discredited in the mainstream press for being burdensome and charging extortionate rates of interest
. However, it's important when evaluating payday lenders to look at the exact amount you will be charged i.e. the total amount you will be due to repay at the end of the loan term, as opposed to any statutory or legal requirement or measurement like APR. APR is essentially an annual measurement that, in the context of payday lending, holds very little relevance in providing a true indication on the value of a loan. Using APR to measure the cost of a payday advance is a bit like asking a taxi driver how much he would charge over the course of one year it doesn't make sense. Payday advance loans are short term loan offerings typically spanning a period of up to 45 days. The average payday advance lasts a period of 20 days.
The main charge that should focus on is the exact charge stated by the lender on the amount borrowed. Most lenders these days are very conscious about the fact that APR grossly misrepresents the true cost of a loan and as such these lenders will go to a great deal of trouble to explain the cost in terms that make more sense to consumers. The typical or standard measurement for a payday loan is the charge per 100 borrowed this is typically 25 however over an annual period would amount to in excess of 1355% APR.
Some lenders take this process a step further and provide an indication on what a payday advance costs relative to other available sources of credit like a bank overdraft. Furthermore, some lenders will not offer a flat charge per month but will rather set a daily charge this charge is usually in the region of 1% per day. Whether or not you opt for a fixed charge or a daily charge depends solely on your personal circumstances if you plan to take your loan out for a period of longer than 30 days then the fixed charge may be appropriate. However, if you plan to take a loan out for only 3 days then you can save a lot of money by opting for the daily charge.