Payday loans – interest rate and fees

Payday loan industry was set up in the 1990s. Since then it has established over twenty thousand locations nationwide as well as it’s started operating on the Internet introducing online payday loans. Payday lending over the Internet has quickly gained on popularity because it saves plenty of time and doesn’t involve traveling or searching for a loan shop. Moreover, payday loans online are available 24/7, including weekends and holidays. Payday loans are also called cash advance loans, overnight loans, cash loans, etc. Regardless of their name, however, they all refer to short-term, unsecured and small-amount cash loans. The borrower is free to apply for any amount up to $1000 (in some cases more) until his next paycheck arrival. Very often the loan is unsecured, which means that no collateral is needed as a security agains the loan.

Payday lending advertises itself as quick and trouble-free solution to temporary or unexpected financial troubles. There exists a popular conviction that payday loans are low interest loans and that they have low fees. In fact, cash advances are expensive and very often lead to serious long-term financial problems, especially when taken unwisely. Payday loans with low interest and low fees simply don’t exist. A typical two-week payday loan has an annual interest rate ranging from 391 to 521 percent. Many lenders take more than one loan. According to some sources, a typical borrower takes nine payday loans a year on average and remains in debt for over 200 days of the year. Repeated cash advance loans produce approximately $3.5 billion in fees per year. Borrowers with twelve or more loans per year generate sixty percent of payday lending business, while borrowers with five or more loans a year generate as much as ninety percent of business. Payday lenders prey on repeated payday loans, high interest and and high accompanying fees. Low interest and low fees payday loans are a myth.

Interest rates and fees

Many online lenders don’t charge interest on the loans they provide. Instead they charge a fee for every $100 you borrow. A lender can charge you a $15 fee. You will have to repay $115 to the lender at the end of the term. The cost of the $100 loan is a $15 finance charge, which amounts to an annual percentage rate of 391 percent.This may vary from lender to lender.