Comparison unsecured and secured loans from different companies offer you a set of contrasts. These loans are offered at ranges of different interest rates , from the great value to the more expensive ones. Some lenders will offer finance at less than 10% Annual Percentage Rate, while others might reach much higher, with up to 25% APR being charged in some approvals. The rate you get will be decided by a range of factors, such as your past credit behaviour, whether any security is offered, your income, repayment capacity and so on.

However, when you look at the APRs offered by short term lending companies, the numbers are of a different order altogether. It's not unusual to see interest rates of 300% APR or even higher, with some calculations actually putting the APRs into the 1000% and above range on these loans. Clearly, this makes the short term cash advances much more expensive than other types of finance. Why is this?

While there's no denying that Payday advance is expensive, the figures are a little misleading. Cash advance payday loans are not designed for long term lending, which is what the APR system is designed to measure. In most cases, payday advance is taken out over a period of days or at most a few weeks, and will be charged a flat fee however long it actually is to your next salary cheque, rather than incurring interest in the traditional sense. This short term repayment factor vastly inflates the APR figures, making the loans look very overpriced, when in fact few people will (or should) be charged those high figures as the loan is not kept unpaid long enough.

Nonetheless, the fees involved with the payday advance can be hefty - £15 for each £100 borrowed is typical, with some lenders charging even more than it. The basic reason for this is that the loans are available to almost anybody with no credit check/ with a job and suitable bank account, and with all types of finance, the easier the approval process the higher the risk borne by the lender - and so the more expensive the particular loan will be. Also, the speed of cash payout in case of payday advance is a major benefit , and as with anything, you tend to pay more for this added convenience and speed.

No one can deny that payday advance is at the costlier end of borrowing, but if you only use them in an emergency and don't extend the repayment term, you will not be racking up the crippling interest charges that the APR figures might suggest. You might well feel the costs involved are outweighed by the convenience and speed of getting hold of instant cash to see you through a budget shortfall. While these short term loans are certainly useful in an emergency, they aren't suited to papering over the cracks in a budget that doesn't balance equally. If this sounds familiar to you, it might be the right time to take a look at your finances, and either try and cut down your expenses if possible, or restructure your debts with, for example, a consolidation loan.