If you are strapped for cash and are considering taking out a payday loan, there are several things you should first consider, such as how high the fees and interest rates associated with your loan are. Often times with payday loans, the rates are much higher than other types of loans, and can end up putting you more in debt than you were to start with.
Payday loans typically range from approximately $100 to $1000, depending upon your state’s legal minimum. The average loam time is two weeks, after which time you would have to repay the loan along with the fees and interest you accrued over that period. These loans usually cost 400% annual interest (APR), if not more. And the finance charge to borrow $100 ranges from $15 to $30 for two week loans. These finance charges are sometimes accompanied by interest rates ranging from 300% to 750% APR. For loans shorter than two weeks, the APR can be even higher.
In most cases, payday loans are much more expensive than other cash loans. For example, a $500 cash advance on an average credit card that is repaid in one month would cost you $13.99 in finance charges and an annual interest rate of about 5.7%. A payday loan, on the other hand, would cost you $17.50 per $100 for borrowing the same $500, and would cost $105 if renewed once, or 400% annual interest.
Read on to see examples of the charges and annual percentage rates (APR) that popular Texas lenders charge for a two week loan period.
Pay Day One
$100 borrowed results in 598.51% APR and $22.88 in finance charges.
$200 borrowed results in 596.64% APR and $45.77 in finance charges.
$500 borrowed results in 596.62% APR and $114.42 in finance charges.
$1000 borrowed results in 596.62% APR and $225.24 in finance charges.
Cash Net U.S.A
$100 borrowed results in 664.29% APR and $25.48 in finance charges.
$200 borrowed results in 664.29% APR and $50.96 in finance charges.
$500 borrowed results in 664.29% APR and 127.60 in finance charges.
$1000 borrowed results in 664.29% APR and 254.79 in finance charges.
NCP Finance Limited Partnership
$100 borrowed results in 641.59% APR and $25.38 in finance charges.
$200 borrowed results in 641.59% APR and $50.75 in finance charges.
$500 borrowed results in 651.79% APR and $126.91in finance charges.
$1000 borrowed results in 681.77% APR and $253.83 in finance charges.
Midwest R&S Corporation
$100 borrowed results in 583.45% APR and $22.38 in finance charges.
$200 borrowed results in 583.45% APR and $44.74 in finance charges.
$500 borrowed results in 583.45% APR and $111.91 in finance charges.
$1000 borrowed results in 583.45% APR and $223.43 in finance charges.
So before you decide to take out a payday loan, be sure to consider your options. You may find a less expensive alternative will help you to get out of debt quicker and easier. However, if you must take out a payday loan, it is imperative that you research potential lenders to determine which one has the lowest APR and finance charges. While it may appear to be a good deal at first glance, further investigation might reveal hidden fees and interest rates that could put your further in debt, and before you know it you’re back at square one.