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Why are interest rates for payday loans, so high?

October 26, 2017 Financial Advice, Payday Loans

Coming across advertisements for online 30 day payday loans is a pretty common occurrence in today’s online world. Despite this, not everyone is granted an online payday loan. In order to get accepted, many factors are considered by the lenders, such as past credit rating. However, the question remains, why would anyone choose a payday company for a loan, from their bank? And why is there should a big difference in interest rates?

Why banks do not offer 30 day payday loans

Due to the risk, it would impose on the banks, they see no benefit in entering this market. In fact, thanks to their overdraft interest rates, the banks are making a very healthy profit, with very little risk. By charging interest on debit card overdrafts, the chances of a customer not paying back the overdraft are greatly reduced. Although many of their customers are in need of immediate loans, the banks gain no benefit from offering this service.

Benefits of online 30 day payday loans

Acting as a safety net to many, online payday loans provide some leeway for their customers. Life has a funny way of throwing obstacles in our way, at the worst possible time. When speed and flexibility is a virtue, banks from the loans become useless. In many cases, some customers could be waiting months for a loan to be approved, and by this point, the emergency has turned into crisis.

Is it possible to find cheaper online 30 day payday loans?

Competition in the payday loan market has never been great. Due to this competition, some payday loan lenders lower their interest rates in an effort to gain more custom. Having said that, it doesn’t always work in favour for the lender, as many customers overlook interest rates.

When using our services, always check the interest rates on offer, before agreeing to anything. The same goes for any charges that may appear – you will no pay anything without agreeing to.

Why do lenders have high interest rates, in comparison to the bank?

As mentioned previously, high street banks steer clear from payday loans, due to them viewing these loans as high risk. Of course, banks do offer loans, but they’re usually for high amounts, for the long-term. Payday lenders offer loans, and make them available much, much quicker than highstreet banks. Despite many customers having bad credit, payday lenders will still offer the service. Due to this risk, the interest rates are much higher than long-term loans.

Recommended advice from Loanline

Before agreeing to an online 30 day payday loan, you need to be certain you can repay the loan. Before agreeing to anything, please read what it is you’re agreeing to. Any loans through Loanline, should not be used as a long-term financial solution. If you are experiencing money problems, please seek advice from the Money Advice Service, who will be happy to take your call.