With most personal loans, you will be required to pay the total amount over a set period. This is usually spread over a number of years, with equal instalments paid each month. However, this isn’t the case when it comes to payday loans.

One of the things that really sets payday loans apart from any form of long-term borrowing is the way in which it is repaid. In the vast majority of cases, the borrower will pay everything off in one hit. That means that the original loan amount, all interest and any charges will be payable in a single lump sum. What’s more, this will need to be repaid within 30 days, giving you very little time to gather the necessary funds.

The reason behind all of this though is that payday loans are designed with convenience in mind and certainly aren’t suited for those who are seeking any kind of long-term solution. This is why the amount available to borrowers is usually limited, especially if they are using the service for the first time. So whilst you might look to borrow thousands from your bank, a payday loan company might only be prepared to offer hundreds. This helps to limit the risk for both parties – the lender and the borrower.

Due to the nature of this kind of borrowing and the reduced amount available to consumers, instalments are largely unnecessary. The only occasion where they are likely to be offered in fact is when a customer defaults on their payment and is struggling with mounting charges. If this should happen, they may have their debt halted and be allowed to pay off in affordable chunks. However, this will still see the borrower incurring fees and is certainly not recommended.

As such, it would only ever be in extreme circumstances where any such provision would be made. Instalments simply don’t fit the short-term lending model. Due to the interest rates applied, it wouldn’t be financially prudent for either party to seek any kind of prolonged alternative.

If you have ever investigated or even applied for a payday loan, you’ll be all too aware of the interest rates that are applied to this form of borrowing. The representative APR routinely runs into many thousands of percent. This is in stark contrast to the double or even single digit rates offered by banks and other long-term lenders.

The reason for this is two-fold. Firstly, payday loan companies are more liberal with who they lend to; as such they will often take on borrowers who have a poor credit rating and those who may have been rejected by other institutions. Secondly, it is designed as a short-term solution.

As such, even if the advertised rate is something like 1,800% (possibly higher in some cases), the likelihood is that you’ll actually only ever end up paying between 20-30%. This is simply because APR is based on an annual rate of borrowing and is therefore not always representative of short-term loans, which may only actually last for a few days.

If you are looking to borrow a sizeable amount (anything over £1,000) then you should probably look to see if you can get a personal loan. This will allow you to repay the amount over a prolonged period, giving you more time to amass the necessary funds and limiting the potential financial impact. Choosing a short-term option in these circumstances can be quite restrictive, particularly as you will need to repay it in one go on your next payday.

So, to briefly summarise, payday loans are very much a short-term solution, repayable in a single instalment within 30 days. Therefore the vast majority of companies won’t allow multiple instalments.

Vincent Rogers is a finance writer who writes for a number of finance businesses. For reliable payday loans, he recommends http://Paydaypower.co.uk

Vincent Rogers is a finance writer who writes for a number of finance businesses. For reliable payday loans, he recommends http://Paydaypower.co.uk

Author Bio: Vincent Rogers is a finance writer who writes for a number of finance businesses. For reliable payday loans, he recommends http://Paydaypower.co.uk

Category: Finances
Keywords: payday loans, same day loans, loans, UK, finacne