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Posted On January 15, 2021 In Investigation With 32 Views

Money Insider: Find a cheaper alternative to payday loans

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Money Insider: Find a cheaper alternative to payday loans

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We are constantly bombarded by payday loan adverts, on television, online, in newspapers and on billboards, so it’s no surprise so many have signed up for this high-cost credit. But just because your credit record isn’t up to scratch, it doesn’t mean you have to face crippling four-figure payday interest rates, there are cheaper alternatives.

Specialist credit cards

Mainstream credit card companies will decline you if your history shows that you have missed a couple of credit payments or have a county court judgment recorded against you from a few years back, but there are specialist credit cards that give you the chance to rebuild your credit record.

Cards from Luma, Aqua, and Vanquis offer a genuine opportunity for borrowers to prove their creditworthiness. The interest rates are higher than standard credit cards but still far cheaper than payday loans, with Vanquis charging a representative APR of 39.9 per cent and Luma and Aqua 35.9 per cent APR.

Borrowing ВЈ400 on a credit card at 39.9 per cent APR will cost ВЈ13.55 in interest for one month, whereas the same sum borrowed from Wonga will set you back more than nine times as much at ВЈ127.15 at an APR of 5,853 per cent.

If you borrowed £1,000 over 12 months on a credit card from Luma at 35.9 per cent APR it would cost you £100.41 a month and you would pay back a total of £1,204.92 – an interest charge of £204.92 in a year.

To rebuild credit status you need a history of using a credit card in a responsible way, so if you make payments on time EVERY month your credit score will gradually improve.

If you repay the statement balance in full each month, you help your credit score without paying any interest charges.

Guarantor loan

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