Calculating the REAL Cost of Payday Loans
Are you keen on applying for a payday loan? Before you do that, however, you should first be aware about how payday loans will cost you. The sad truth is that though the borrowing part can be a tad easy, you will be paying more than what you will borrow and not just by a little more. You may be too much in a hurry to get the cash that you are willing to sign any agreement. So, better check yourself before you decide to apply for payday loans.
Taking note of APR, loan amount, and other payday loan fees
Make sure that you are clear about what the annual percentage rate (APR) is based on the loan amount and other, hopefully not hidden, payday loan fees. Payday loans are short-term loans that require big interest rates to be paid. For example, a hundred dollar loan have to be paid in full plus a fee of $15 according to the rule book of some lenders. If you cannot pay within the period stipulated, you may even have to pay another $15. Imagine if you cannot pay for a year. You will see a staggering APR of 390%. So, you have to calculate the possible amount you have to pay back if you have a payday loan. You may be in such a rush to get the money but you could still consider other options, depending on your situation. This could be an extension request with creditors or a loan from a lender with smaller interest, such as your credit union.
Payday advance loans pricing structure
The payday advance loans pricing structure is constantly criticized because of the huge APR. The borrower also needs to pay after quite a short period of time, such as a week. Lenders, however, defend their practice. They say that the money they charge is the money used for fast transactions.
So, do you think a payday loan is for you despite the high APR? Well, it depends. Payday loans are aimed at people who do not manage to reach their next salary without getting into some financial emergency. Sometimes, in order for them to survive, they will have to brave the high interest rates. They just do not have a choice. So, if you want to be able to choose, you should always budget properly and set aside some money for emergencies.
Related Questions:
1. What do you think of the pricing structure of payday loans?
2. Would you be able to pay your loans if you constantly have to depend on payday cash advances?
3. What do you think are good alternatives to payday loans?Are you keen on applying for a payday loan?
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