Payday loans UK rates appeal to people with limited or no credit capability to obtain quick cash. Payday loan companies realize the limited options available to their credit-strapped clientele and charge high interest rates for these short-term loans. The most common loan amounts taken out are usually in the $100 to $300 range with a fee that is assessed on top of this amount.
Typical Payday Loans UK Rates to Expect
Payday loans are very short term. The lender agrees to allow the borrower to write a check for a chosen amount that the lender will hold onto until the borrower’s next payday, which is usually one or two weeks or a month later. When the payday rolls around, the check is cashed. Interest rates can run up to 911 percent for one-week loans. For every $100 borrowed, up to $17.50 of interest can be assessed. This equates to 456 percent interest for a two-week loan and 212 percent for a one-month loan.
The problem, beyond the obvious issue of exorbitant fees and/or interest, is that this is a difficult type of debt to break free of, as some people rely upon it time and time again. Once someone is in this cycle, it is extremely hard to break out of it. The payday loan industry defends its practices by stating that it must charge such high loan rates in order to offset the risk it is taking to extend loans to its customers, many of whom never pay back their loans.