How much does a payday loan cost?
The cost of credit for a payday loan is a flat fee of 25% repayable on your next payday. We charge £20 for every £80 we lend. So, for every £80 you borrow, we require payment of £100.
There are no hidden costs with Payday Express – interest on your cash advance is always 25% of the loan, a comparative rate across payday loan providers.
When applying for a payday loan, we will calculate your exact APR based on the number of days before your loan will be due for repayment. This will be shown to you before you accept the loan. Typical APR is
1737.2% APR.
For ease understanding, here is a table showing the total interest charges and repayment amounts due for different loan values:
1737.2% APR Typical
Cost of Credit: 25%
Why is APR so high?
All Consumer Credit providers are required to quote APR when discussing costs of loans. However, this is not a realistic measure for calculating a repayment rate for payday loans. Payday loans are designed to bridge the gap between now and payday and are, therefore, typically due for repayment within a month. Many finance providers see very little relevance in using such a rate as a comparison and that, if anything, it confuses the consumer.
Not only is APR an inappropriate measure for calculating the cost of a payday loan, but it suggests that payday loans should be compared with larger forms of credit, which are required for different uses. Cash advances offer instant solutions to short-term finance needs. APR is only relevant when comparing identical term loan products.
To further illustrate this confusion, when comparing the costs of payday loans to the charges banks impose on customers for going into unarranged overdraft, attempting to cash cheques with insufficient funds in their accounts, and attempting to make direct debit or standing order payments with insufficient funds in their accounts, one can see how payday loans are often cheaper and more transparent than the alternative of not having sufficient funds before payday.
Such debate continues regarding APR. It is widely suggested that the APR system is not relevant in the small loan, short-term, low-balance market as it can be very misleading. This point was raised during a Competition Commission enquiry into the Home Credit Industry:
“We considered the total charge for credit (TCC) to be a better price measure for home credit loans than the APR, especially for loans of less than a year.”
A Price Waterhouse Coopers report also said:
“Fixed costs associated with administering loans add little to the APR of large long-term loans, but can easily push the APR on small short-term loans high into the triple digits. Hence, if loans of all sizes and durations are to yield a reasonable profit, the APR associated with a large long-term loan is much lower than the APR associated with a small short-term loan
like a Payday Advance.”
Pay only £100 for an £80 loan.
1737.2% APR typical. The total amount payable of £100 is repaid on
your next payday (within 47 days) when we debit your account.
Back to FAQs