Payday loan lenders dispute allegations of excessive lending and the industry usage of the term APR

Dec. 11, 2011 - PRLog -- Payday loans have received allot of bad press in the years since they were first introduced without necessarily deserving such a reputation, let's face it all debt is bad but in some instances taking a Payday loan to pay for bills and urgent expenses is a viable option amongst many when times are hard.

Chief executive John partridge for Payday loan lenders governing body expresses his concerns-

"The main concern regarding Payday loans is the unfairly high APR that is imposed upon them, APR means "Annual Percentage Rate," and should not be applied to Payday Loans as their loan duration is typically 1 month (short term loan duration) but unfortunately this term is a legal requirement but does not represent the true percentage (%) that is incurred when taking out a Payday Loan over a 1 month duration."

Payday loan lenders http://www.pay2dayloans.co.uk are in dispute of recent claims of being called "debt traps," in press releases by the BBC http://www.bbc.co.uk/news/uk-16063271 , lenders feel it is misrepresenting the loan model and  it's intention.

So what does this mean and why does such a high APR reflect a far lower true percentage?

"The term APR and the high percentage values that have been imposed are a legal requirement to deter persons from taking out a Payday loan," says John Partridge "However in many instances a Payday loan is a better alternative than incurring likely more costly bank charges when exceeding a given overdraft or un-arranged lending fees. Most banks are now charging £6 per day for exceeding a given overdraft or un-arranged loan up to the value of £90 per month."

The APR typically assigned to Pay 2 day loans is 1737% (variable) sounds very high, yet below you will see some example loan values and amounts to be repaid:

Loan amount: £80
Amount payable: £100 (1 month loan)
Fee: £20

Loan amount £200
Amount payable: £250 (1 month loan)
Fee: £50

As you will see the true amount percentage wise equates to 25% of whatever the loan amount was over a 1 month duration, this is variable on certain circumstances but borrowers should expect to repay in this region, most Payday loans range from 1737 % APR to 2814.2 % APR but make sure you check before taking out a loan and are aware fully of the charges that will be incurred.

Once again 2814.2 % APR sounds extremely high, equates to:

Loan amount: £80
Amount payable: £103.60
Fee: £23.60

Taking into consideration most banks are charging £6 per day up to the value of £90 in a 1 month period irrespective of the amount the overdraft is exceeding displays a far higher APR, even if a overdraft was exceeded by £1 over a 30 day period without being paid off the fee would likely be £90, this is one of the main reasons persons are opting for a Payday loan over exceeding a overdraft as they are likely the cheaper alternative.

The BBC points out irrespective of whether the "APR," is not a true reflection of the incurred fee's many persons are still taking out loans they can not afford to make ends meet in a never ending uphill battle.

Pay 2 day loans - http://www.pay2dayloans.co.uk PR representative "Ceri Thomas," agrees that taking a loan out to pay for another loan is not the ideal situation, stating -

"We have no intention of making financial circumstances worse, we purely offer a fast alternative for persons who need cash when times are hard, we do not promote excessive borrowing and purely promote ourselves as an option to other lending models that may or may not incur charges at higher costs, recent survey's represent 65% of Payday loans are to persons needing to pay off debtors who are likely going to charge far higher charges than ourselves."

Payday loan lenders are protesting against applied term "APR" and requesting a potentially more suitable label of "MPR," meaning "Monthly Percentage Rate," as they feel this is more applicable to the Payday loan sector, respective case details for review of the industry term are yet to be disclosed.

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Pay 2 day loans is a reputable payday loan lender, we offer financial services coupled with help and support of the Payday loan sector.