Payday Loan Companies Are Their Rates Too High

Payday Loan Companies Are Their Rates Too High



Payday Loan Companies - Are Their Rates Too High?
Payday loan companies do provide cash at​ higher rates than other types of​ credit programs .​
But these rates are for short periods,​ so fees are often small .​
While payday loans are not for every credit situation,​ they can help during a​ financial emergency.
Are Rates Too High?
Payday loan rates are higher than other forms of​ credit for a​ couple of​ reasons .​
First of​ all,​ payday loans are for a​ small amount for a​ short period .​
Lenders have to​ cover the​ cost of​ processing such transactions .​
Unlike mortgage companies,​ payday companies don’t add up interest charges for 30 years.
Secondly,​ payday loans are at​ a​ higher risk of​ defaulting .​
Since there are no credit checks,​ people are more likely to​ fail to​ pay back these types of​ loans .​
That cost is​ passed onto everyone else.
Understanding the​ Numbers Rates
Most people get excited about APRs,​ annual percentage rate .​
If you​ compared the​ APRs of​ payday loans and mortgages,​ you​ will find the​ payday loan will have the​ larger number .​
But,​ that is​ misleading.
For one,​ payday loans are held for days,​ not a​ year .​
So you​ never pay that percent .​
With mortgages and other types of​ loans,​ you​ take years to​ pay the​ interest and principal .​
So with a​ payday loan,​ on​ average you​ would pay 15% of​ the​ loan in​ fees .​
With a​ mortgage,​ more than likely you​ will pay over 100% in​ interest charges.
Rates Lower Than Late Fees
Taking a​ look at​ late fees on​ some bills or​ credit cards,​ they can be significantly higher than the​ fee for a​ cash advance .​
Fees can also really add up with bank and merchant charges for bounced checks.
On average,​ a​ cash advance of​ $100 will have a​ $15 finance fee .​
Often bank fees average around $25 for each NSF check .​
Merchant fees are often higher .​
So while it​ will cost you​ for a​ payday loan,​ they are cheaper than paying late charges .​
You should also consider the​ impact on​ your credit report.
In the​ end,​ you​ have to​ decide if​ a​ payday loan is​ in​ your best interest .​
With instant service and fast cash,​ payday loan fees can be insignificant compared to​ other costs.




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