What Are the Interest Rates on a Payday Loan and Can You Afford Them?
Don’t you wish there was an affordable way to borrow money? A way to get the cash you need to make ends meet this week that won’t make you tear your hair out with frustration and worry? One of the biggest concerns people have with trying to borrow cash is the cost. One look at the interest rate on some loans could have you running in fear. There are some secrets you need to know about these loans and what interest rates really mean. We’ll clear it up for you and show you how it is possible to make a smart decision about getting a payday loan.
The Real Question is How Much Will the Loan Cost You?
Interest rates, APR, and fees can be confusing when you’re looking into loans. It almost seems like you need a financial degree just to figure it all out, but we can help. The workings behind a payday loan and other loans are deceptively simple.
The first thing you need to know is that the most important question is not what the interest rate is but exactly how much a loan will cost you. Interest can be tricky. A low number may seem like a better deal, but depending on the loan amount and duration, it could end up costing you much more than a higher-interest product. Let us clear this up for you with a few simple explanations.
Don’t Be Fooled by APR, Learn the Truth
Some lenders want to confuse you into thinking their lower interest rate makes their loans more affordable. The media wants you to think that payday loans are bad and too expensive for most people. They want you to think that payday lenders are ripping you off or that they think you’re stupid.
Loans must list interest in the form of an APR, annual percentage rate. This is required by law. But it can be confusing. The APR tells you what you would owe on a loan if you had it out for an entire year. By that measure, 500 percent seems ridiculously high. Another loan, like a mortgage, might list an APR of just five percent. One loan costs more than the other, and it’s not the smaller payday loan.
To show you what we mean, let’s compare a mortgage to a typical payday loan. Because you repay a payday loan with a high APR within a few weeks, you’ll only pay $20 or $30 per $100 that you borrow. Seems reasonable, right. With a mortgage that you need 30 years to repay, you will end up paying much, much more, even double the original amount you borrowed, thanks to interest over decades.
So, Can I Afford a Payday Loan?
What does this all mean for you? If you need a small amount of cash, and you are able to make repayment on a small loan in a few weeks, a payday loan is likely the most affordable option. Yes, the APR is high, but now you know the secret. You know what the media keeps trying to hide from you: that rate doesn’t add up to much if you borrow small amounts of money and repay loans quickly.
How Can I Make a Loan More Affordable?
For most working adults, a payday loan is affordable. It’s easy to use; it’s fast; getting approved is easy; and the interest costs are reasonable. Even so, you may find that borrowing any amount of money pushes your limits. Are you worried about borrowing and not being able to repay the loan? It’s a common concern. Here’s what you need to do to ease your mind and make sure your next payday loan will be within your means:
• Take a good look at your expenses. Line up your bills and see what’s due when and how much you owe.
• Look at your bank account and determine by how much you are coming up short. Do you need $100 more to make the bills this week? Or is it more like $500?
• Once you know how much you need, you can make a smarter choice about using a payday loan.
• Borrow only what you need, no more.
• Repay that loan as soon as you possibly can. Do what you can, cutting back on other expenses if necessary, to repay the loan in full when it’s due. If you have to roll the loan over or extend the loan period, you probably can, but paying back on time will make it more affordable.
Are Credit Cards Less Expensive Than Payday Loans?Turning to a credit card over a payday loan may be tempting, but avoid it at all costs. It’s one thing if you are able to repay the full amount each month, but if you can’t the interest rates of 12 to 24 percent will have you making only interest payments for the rest of your life. Credit cards are notoriously expensive, another example of how the interest rate doesn’t really tell you how much a loan will actually cost.
How Do I Know How Much the Loan Costs?
All this information is great, but you really need to know exactly how much a loan is going to cost you. Finding out is simple and free: Simply apply for the loan. You’ll get redirected to a loan document that clearly states not just the interest or APR, but the actual total cost of repayment and the date that amount is due. You’ll see it in bold at the top of the document so you can’t miss it. If you are happy with the amount, e-sign the document and send it to the lender for final approval.
If you’re not happy with it, don’t go forward. It’s that simple. This is risk-free. You can’t lose. To find out how much a payday loan will cost you today, apply now.