Although the Government has yet to make a final decision , it is likely the payday lenders will be made to repay any interest taken above the 100% mark. As with all financial claims, it will simply take one case to set a legal precedent, then all payday lenders will be forced to repay interest payments taken above 100% of the original value of the loan.
The payday loan rebate calculator above provides a capped figure and original interest calculated on payday loans and any rebate figure that you may be due.
If you have taken out a payday loan, we wish you the best of success in recovering the interest paid above 100% and hope our payday loan rebate calculator helps you to calculate how much money you are owed.
If you are thinking of taking out a payday it is important that you:
- Use the interest calculator to provide an illustration of monthly loan repayment amounts for different terms and interest rates
- Review the personal loan borrowing considerations before commiting to a loan agreement
- Email the Loan Calculation to yourself. Take a few days and mull over whether you really want to commit to that monthly interest repayment before you commit to the loan.
Use the payday loan calculator to calculate your monthly interest repayments, compare loan repayments over different periods and define what is the most affordable option for your financial situation. The payday loan calculator will provide your a monthly interest repayment over 1 year,2 years,3 years,4 years,5 years, 10 years and compare them to a monthly repayment period of your choosing (so you can create your own personal payday loan illustration).
Government set to Cap Payday Loans
On 25th November 2013, Chancellor of the exchequer, The Rt Hon George Osborne MP, announced plans to legislate for a cap on the cost of 'payday loans'. It was part of the Banking Reform Bill initiative, which itself was part of a wider policy drive 'Improving regulation of the financial sector to protect customers and the economy and Financial services'. A new regulatory body was to be introduced to protect consumers. The 'Financial Conduct Authority' (FCA) will have the power to cap payday loans, once the policy was developed.
The Chancellor of the Exchequer said "We have created a powerful new consumer regulator to regulate the payday lending industry and now we're asking them to set a cap on the cost of credit. That will make sure that hardworking people are served by the banking system".
In April 2014, Martin Wheatley became the Chief Executive of the FCA and is currently working to a deadline of 2 January 2015, when the new policy will be put into effect.
On 11th November, the final policy was agreed and published;
The main pieces of information for many people are (courtesy of FCA report PS14/16):
- 0.8% - When loans are taken out or rolled over, the interest and fees charged must not exceed 0.8% per day of the amount borrowed.
- £15 If borrowers default fees must not exceed £15. Firms can continue to charge interest after default but not above the initial rate
- 100% - total cost cap 100% of amount borrowed (applying to all interest, fees and charges). Borrowers must never have to pay more in fees and interest than 100% of what they borrowed.
Martin Wheatley advised "Our price cap means that customers taking out a loan on or after 2 January will never need to pay back more than twice what they borrowed, and someone taking out a typical loan over 30 days and repaying on time will not pay more than £24 per £100 borrowed".
Policy statement PS14/16 [PDF]
Considerations before taking out a Payday Loan
- Affordability: Be sure you can really afford to make the loan repayments. Only you really know if you can afford a loan or not and taking out loans which you will struggle to repay will only cause you financial hardship and pain in the future. Remember,
- Secured Loans: READ THE SMALL PRINT: Your home may be repossessed if you do not keep up your loan repayments (applies to any loan or debt secured on your home).
- Shop around: It always pays to shop around and see what deals are available. Most banks and building societies run promotions at various points of the year. Never assume that one lender is better than the other, look for the good deals as they could save you a lot of money.
- Check the Interest Rate: The most common mistake that lenders make is not fully reading and understanding their loan interest rates. Make sure that the catchy low interest rate is the one you are getting. Most lenders advertise at low interest rates to get you in the door but you are likely to find that achieving the low rates means borrowing large amounts over long terms, this will mean you repay much more money! Don't be tempted!
- Borrow Little, Repay Quickly: The best loan is one repaid quickly. A quick repayment means less interest paid and less stress about your debt.
- Pay Day Loans: Pay day loans are brilliant if you want to destroy your financial credibility, get yourself into spiraling debt and have years of stress and anxiety over your finances. If you can, DO NOT use Pay Day lenders. They do not care about you or your finances and will destroy your life simply to make money. At iCalculator, we seriously hope that the government takes measures to outlaw these morally and ethically corrupt businesses. The news that Payday loans will be capped at 100% interest of the figure borrowed but this is only a tiny step and will not fully protect those who are desperate for cash.
- Don't Lend at All! It's difficult to avoid taking loans in modern society. Modern life is about consumerism and spending. Our grandparents survived and had healthy life's my getting by and enjoying the rare treats. There is a lot to be said for living a simpler life without financial stress. If you can, save. Make that reward or treat worthwhile my making your money work for YOU and not for someone else.
- Personal Loan or Car Loan? Personal loans normally offer better interest rates than car loans but your really should shop around. Second hand dealerships normally offer ridiculous APR rates and will push you to take the loan, often showing a lower APR that you will receive. Used car loans typically provide large commissions for used car dealerships and will rarely offer a better interest rate that a personal loan. If you are looking to buy a new car, shop around and be patient. Almost every dealership offers a 0% finance deal at some point in the year. You can get your dream car and a dream interest rate if you are patient and buy wisely.