Reasons Why Cash Advance Loans Are Very High-Priced - By: Martin Sumner

Cash Advance Loans can be a very useful service for people who have a desperate need for speedy funds to tide them over until their next wage packet arrives. Whether this is down to a cashflow problem, or an unanticipated expense, cash advance loans can help bridge the shortfall.

Cash advance loans come at a price though - and it's a large one. Wage advance loans are widely regarded as one of the most expensive forms of legitimate borrowing out there, with massive rates of 1000% or more routinely encountered. Just why are the costs so inflated?

The first thing to point out is that wage advance loans are borrowed over a fairly short time period, while the common APR measure of interest charges is intended for measuring how much interest would be charged over an entire year. As next to no pay day loans are borrowed for this lengthy period, APR numbers are perhaps not the best way of assessing how costly they are in real life situations.

Even so, the prices are substantial. You're paying for convenience and speed, as most loans can be placed in your bank account within 24 hours or less, and also because of the lack of credit scoring you're also in some senses paying for the chances taken by the lender who may extend money to individuals completely unable to pay it back.

You're also paying a higher amount because the finance companies know that those who need funds urgently are happy to pay more than those looking for longer term credit and are willing to shop around for a less expensive deal.

It is this final reason that is the important one payday loans are so pricey - as a group, payday finance companies acknowledge that they are the lenders of last resort, and so can afford jointly to charge high prices for their doubtlessly popular services.

Payday loans are amongst the most expensive kind of finance out there. Why do they cost so much, and are they worth it?

Martin writes for UK Payday Loans, your source for fast cash advances in the UK