Payday loans have been attacked as one of the most expensive forms of loans in the UK, with some APRs reaching 9889.3%.
Research from uSwitch.com claims that somebody borrowing £750 from a payday loan company could end up paying back up to £1687.50 if they defer repayments for a total of five months.
It says this coupled with high APRs are making them one of the most expensive loans available in the UK today.
Payday loans can provide consumers with quick and easy cash, and, if used correctly, serve as one of the few forms of small loans available for terms as short as 7-30 days.
Louise Bond, personal finance manager at uSwitch.com comments: “Both the APR and the amount of interest charged by pay day loan providers is extortionate however you cut it. As with all loans, the problems occur when people cannot meet the monthly repayments and, in some
cases, end up taking a second loan from another provider to repay the debt.
“Some companies will allow consumers to defer repayment for several months which, although it’s better than
selling the debt onto a third party, it can rack up a phenomenal amount of interest.
Robert Sinclair, director of the Association of Finance Brokers says payday loans can offer a solution for some borrowers.
He says: “Payday loans offer one option for borrowers who are looking for short-term finance and we are finding that brokers are starting to offer them as part of a wider product offering.”