Payday Loan APR
Posted on Saturday, July 24th, 2010 at 12:04 pm in Financial Planning, Helpful Payday Loan Info
Many groups criticize payday loans for their triple-digit annual percentage rates (APR). They quote APRs of 600% and above, calling payday loans “costly cash” that takes advantage of desperate, cash-strapped customers. But what critics won’t tell consumers is that payday loans rise in cost just like any other form of credit that is paid back over a long period of time. Credit card companies advertise interest rates of 15%, but their customers will only see that rate if they pay their bills in full on the due date. If you only make the minimum monthly payment or are late and miss a payment, your interest rate will significantly increase with each payment you make. The same is true of payday loans.
APR is usually used to compare the cost of similar types of long term lending. Trying to compare a short term payday loan to different types of long term lending using APR is ineffective and doesn’t tell the whole story. APR most effectively compares types of credit that are paid back over the duration of a year or longer. Payday loans have a much shorter lending period, lasting 30 days at the most when the loan and interest are then paid back in full. A consumer who borrows $100 with a $15 service fee from the lender might see a 182.5% APR if he rolled over his loan every month for a year before repaying it, but that is typically not the case with cash advances.
Don’t let misinformed critics inflate the real cost of convenient cash. It’s true that convenience does come with a price, but when used properly payday loans are a low cost cash option for emergency finances.
Related posts:
How it Works
Complete the short form.
We match you with a lender based on their requirements and direct you to their website.
The lender will then display loan rates, terms and conditions for your acceptance.
Cash is directly deposited to your bank account after approval.
