Payday loans are the prevalent loan service in town mainly because of how accessible it is for people. Payday loans are very short-term loans and are readily available for many needy individuals. Even with its high-interest rate, it has been a great option for users, especially when there are no other means of funds from the traditional institutions. It is associated with some risks, however, but one can cope with the risks. Let’s consider some facts about payday loans below.
Facts about Payday Loans
Payday loan interest rates range between 391% and 600%. This is high compared to credit cards, which charge about 15% to 30% rate on their interest. Its personal and online loans charge interests at the rate of 10% to 35%.
Worse still, if you can’t meet up with the deadline, your debt increases more. Statistics from the Consumer Financial Protection Bureau shows that about 80% of users don’t meet up with two weeks deadline of payday loans. This is the reason behind the increasing number of debtors in the United States.
Indeed, payday loans may seem useful when you use them for an emergency bill or even pay off another debt; however, in the long run, it costs you more. Nevertheless, payday loans can be an emergency backup for your financial problems.
Let’s quickly consider how it works.
How Payday Loans Work
To obtain a payday loan, you need to follow the guidelines listed below.
- Pick up a registration form from any of their offices. You can also fill out this form and get registered on their website. The only documents required for a payday loan are your account number and a recent payslip.
- Once you can provide these documents, your loan application will be reviewed based on your state’s regulations.
- If approved, you will receive cash payments ranging between $50 and $1000 immediately, or the money will be deposited in your account within a day or two. This loan is usually for two weeks, of which the borrower can either post a check to coincide with the repayment date or grant permission to the lender to automatically deduct the exact amount from the borrower’s account.
Interest Rates Attached to Payday Loans
Payday loan interest rates are usually calculated based on the annual percentage rate(APR), just like every other loan lender. Usually, Payday loan borrowers pay an interest rate of about $20 for every $100 borrowed. This amounts to an APR, which ranges from 391% to about 521%.
However, the loan spans for two weeks, and if by the deadline, the customer is unable to repay the loan, then the borrower is asked to roll over his loan. If the borrower consents to this, he has to pay the excess charges that accrue.
Conclusion – Should You Take Payday Loans?
Individuals need to be very careful when taking a payday loan due to the statistics shown above. The risks involved cannot be overlooked, as it can put eventually put individuals into huge debts. However, proper awareness of this service will help you cope with the risks and effectively take the loan without running into debt. We believe that this piece of information has adequately enriched you with every necessary information you need concerning payday loans.