12 Month Payday Loans

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How can Payday Loans be 12 Month Payday Loans? Surely, by definition a Payday Loan is a loan that is due to repaid on your payday, not 12 of your paydays!

 

Is a 12 month loan is completely different to a Payday Loan? A payday loan is a high interest short-term loan. The point here is that a 12 month loan is most definitely an instalment loan, it has to be, after all if you make 12 payments towards a loan, you are paying instalments and 12 payments make up the loan. Whereas a Payday Loan is designed to be a loan, to provide emergency cash, to solve a short term crisis, or just see you over until your next payday, isn't it?.

It can be argued that calling a loan it a 12 Month Payday Loan is a bit like mixing apples and pears, you cannot make the comparison. If you are looking for a payday loan then you should expect to pay it back on your payday…as per its name and title. If you are searching for a longer term loan over 12 months, then you are really searching for an Instalment Loan.  So the term 12 months payday loans can be very misleading for the consumer.

To overcome this confusion the Financial Conduct Authority, when it took over regulation, introduced High Cost Short Term Credit (HCSTC). This was basically any credit where the APR was aboce 100% and the term was less than a year. So in fact this definition would cover both.

So know you know that the term Payday Loan can have different meanings to different people. Some will see these only as the 'Traditional' one repayment loan, whereas other will see a 12 month intslament loan as a Payday Loan too. The only definition that is completely accurate for these products is the one defined by the Regulator as HCSTC. 

 

About the author:

Kieran Moulden is the founder and Managing Director of True Blue Loans (www.trueblueloans.co.uk), a company offering instalment loans over 3, 5 or 6 months, with fixed repayments and no fees, just daily interest. He is passionate about ensure that consumers get a fair and honest deal when dealing with short term consumer finance companies.