Typical Payday Loan Interest Rates and Terms
While payday loans are still a very popular choice for people who are in need of some fast cash, payday loan interest rates can be extremely high, often causing the borrower to pay back much more than they originally asked for. While legislation is being passed to cap some of these exceedingly high interest rates, generally most are still too high for the average consumer to bear.
Some payday loan rates have gotten so out of control that several states are actually starting to ban payday loan businesses from operating altogether. In some cases, these rates can be as high as 300% or even more. The fees that the borrower will pay are sometimes higher than the amount they borrowed in the first place, and in other instances, although they may not have to repay the amount of the loan times three, the fees are still very high considering the amount of money that was borrowed. For example, if someone borrows $100 on a payday loan and includes a $15 fee in that loan with a rate of 390%, the fee alone for two weeks can be $30, or almost one third of the total amount borrowed. Some people may feel that getting a cash advance is better than writing a bad check and having to pay their bank’s bounced check fee, but in reality the cost of most bounced check fees are around $35. If a borrower asks a payday loan company for $200, they may end up paying almost $70 or even more in fees. A bounced check (while certainly not recommended) would cost much less.
Payday loan interest rates often vary state to state, but none have been found to be fair and not overwhelmingly too high. Some states have a cap on the interest rate, while others do not, meaning that the payday lender institution is legally allowed to charge as high a rate as they so desire, leaving the consumer in the dust. Many people have claimed this kind of lending is designed for people with low incomes or low credit scores, but the reality is that many payday lending offices advertise themselves as saviors for anyone who is in need of some money immediately. This has led to many people who normally may have good credit to attempt to get a payday loan and end up in debt a month later when they get hit with high fees. Imagine taking out a loan for $300 and having to pay over $2,000 when all is said and done. With payday loan interest rates as high as they are, and many people requesting extensions for repayment, this figure is not only possible, it tends to be a common occurrence. If you are a consumer who might be in need of some money fairly quickly, be sure to do your homework and find out what kind of interest rates the payday loan offices have. You may want to look into some alternative methods like a loan from your bank or applying for a credit card instead.