How Payday Loans Work: Interest Rates, Fees and Costs
A payday loan provides a quick solution to businesses in times of crisis. A payday loan has become popular in the United States, compared with other loan types. With many lenders offering this loan online, regulating them has become somewhat difficult. Therefore, you may need to do some research to determine the most reliable companies to avoid falling prey to rogue lenders. The payday loan is offered in small amounts but attracts more extensive interests compared to other loans. Expert Payday Loans offers instant loans at a considerable interest.
Application Process
The lender provides the customer application forms. You only need to provide your identification, your bank account, and a recent payslip. Many companies offer between $50 and $1000, which is repayable on the borrowers next payday. The borrower will either postdate the check to coincide with their payday check or give access to the lender to draw money from their accounts.
Interest Rates
An analysis of various lending institutions shows that payday loans attract an average interest of 391%. The standard payment duration is around two weeks. Financial Protection Bureau has noted that nearly 80% of the borrowers exceed this period. Nevertheless, everything depends on your lender; you can contact your lending institution if you are not able to pay within the given time. Exceeding this period automatically swells the interest. This may continue increasing up to the time you can pay fully. The good thing is that you can ask the lender to roll over the amount for a certain period if, for any reason, you cannot repay in time.
Payday Loan Costs
Payday loans charge a percentage fee on $100 borrowed. The cost varies between $10 to $30, depending on your state law and the amount you can borrow. The most common fee is $15 per 100. Therefore, if, for instance, you take a loan of $200, the repayable amount will be $230. If you are unable to repay within the given time, you can request the lender to roll over this amount. You will only be required to pay the interest, and the loan will be extended. You will then have more time to repay your loan, which will attract further $30.
Repayment Plans
Some state laws require the lender to offer customers more time without additional fees if they are struggling with payments. This means that the borrower may apply for a payment schedule without attracting more fees.
Late Fees
The lender may charge some fees in case you do not repay within the due time. This again varies from state to state. The bank can also impose an “NSF” or non-sufficient funds charge if an electronic authorization fails because of an insufficient account balance.
Benefits of payday loans
- Easy application process;
- Quick approval process;
- You can reschedule the payment.
Conclusion
The process of applying for a payday loan is easy and quick. However, you must do a proper analysis of the involved costs. You should compare various lenders to determine the one that offers the best deal. Use this article as a guideline anytime you wish to apply for a payday loan.
