Payday lenders capitalise on Valentine’s Day spending

A select number of payday advance lenders have chosen to capitalise on the spending that traditionally accompanies Valentine’s Day by offering short term loans, with some consumer groups highly critical of the move.

As far as payday lending goes, the actual cost of the loan is rather modest in comparison to some more disreputable lenders, as the promotional deal – £300 for a period of 31 days – will only cost a borrower an additional £75 to repay.  This equates to an APR interest rate of around 1,700 per cent, which may appear high in comparison to a credit card rate but is much lower than some other payday lending rates – and is by far much more inexpensive than relying on unauthorised overdrafts for the same amount.

Despite the comparatively inexpensive manner of the instant cash loans offered by lenders, campaigners say that reliance on short term loans for anything but emergency funds can lead to a slippery slope of spiraling debt.  Missing a repayment on one of these loans can spell financial disaster for many, critics say, as short term loans that ‘roll over’ can result in massive charges and fees being levied on the borrower.

However, reputable lenders say that they inform their customers about the downside to short term loans, explaining to each and every one the real costs involved in repaying such a loan.  Moreover, many lenders will even refuse to extend credit to a borrower if they cannot demonstrate their ability to repay the cost of the loan plus interest, but this particular breed of lenders sadly seems to be more of the exception than the rule, as too many unscrupulous lenders target financially vulnerable classes of Brits such as students and members of the military.

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