subject: Payday Loan Fees: Understanding It Better [print this page] Payday Loan Fees: Understanding It Better
A lot of commercial advertisements showing the goodness of payday loans are also presenting several debates that emphasize more on the rather high interest rates that it actually offer. And with this in mind, one will think if such a loan is still worth all the efforts put into it. If we look closer, we will see that the issue is on the fact that payday loan fees are really higher when you will look at the Annual Percentage Rate (APR) of the various lending companies.
The solution here is that we should look not at the APR but at the length of such loan, the benefits we can get out of it, and the types or kinds of stipulations that come along when we borrow money. And in the attempt to make things clearer and to sort out the confusions, some explanation of the figures is needed.
When we say Annual Percentage Rate, or the APR, it actually means the cost the loan given in percentage format. In reality, the total amount of the loan you have should include the money borrowed and also the interest rate; although it will be noted that some lenders are also including the APR.
When you study it further, when you have a car or a mortgage, some add on expenses are also added in the loan, apart from the amount that you borrowed. This basically means that in order for you to really comprehend what you are really paying for; you have to know everything first about your loaninside and out.
So, upon calculating your APR, you have to factor based on the length of your loan. Remember that the longer the terms are, or the time you will be repaying your loan, it means that the smaller the APR will actually be. So, this obviously shows that opposite will also be truethe shorter your loan is the higher will its APR be. Keep in mind that APR pertains to the annual %; to illustrate this, you have to know that if you have a 2-week loan, this will definitely have a higher APR as compared to a 2-year one.
Usually, payday loans are offering the condition that you have to return the money you had borrowed within two weeks, four at the most. As such, the fee is typically $15 for every $100 loan. When you calculate the APR for this loan that is good for 2 weeks, you will see that it will come out to close 39%; and because of this, the computation has received a lot of unfavorable attention. This might even be shocking to most of us; however when you try considering the fact that some borrowers are taking several years in paying off some of their loans, the APR wherein maybe 21% for instance, then we will see that the balance will be thrown off.
People offering payday loans did not really set out so that they can provide us long term loans in such a way that most banks are doing. Rather, the intention of payday loan lenders is to give us a one-time and short term loan to meet some of our unexpected financial emergencies.
At the end of the day, these loans are really beneficial to some people who urgently need help without having their credit score doing some damage to their changes. Instead of needing an almost perfect credit score, these payday loans require that the borrowers should simply be employed, with a bank account, and some references to back them up.
To end up, consider thiswhen we compare the APR of greatly different lenders, we will just end up confused. But think that when we pay for a $345 loan for 2 weeks, no collateral asked and no limitations set, this is not really ripping us out but helping us, especially when we are in great need.
