Payday loans- What you need to know about payday loans

Payday loans

||Payday loans- What you need to know about payday loans||

Payday loans are short-term cash advances that are designed to help people deal with unexpected financial emergencies. These types of loans are not regulated by any state or federal agencies, and they have become increasingly popular since their introduction in the 1980s. In fact, payday loan companies claim that they provide a service that helps consumers avoid the pitfalls of traditional bank financing. However, many states have recently begun regulating these types of loans, and some have even banned them altogether.

Interest Rates

Interest rates vary depending on the lender, state regulations, and credit score. Most payday lenders charge between 400% - 700%. In some states, they can charge over 1000%.

Fees

Fees associated with payday loans include origination fees, late payment fees, and return check fees. Origination fees are charged upfront and may range between $10 - $25. Late payment fees are charged per occurrence and may range between $15 - $35. Return check fees are charged if the borrower does not receive their funds in full.

Repayment Terms

Repayment terms vary based on the lender. Typically, borrowers have 30 days to pay back the loan. If they do not make the payment, they will incur additional fees. Borrowers should always read the fine print before signing any documents.

Lenders

Lenders are businesses that offer these types of loans. There are many different companies offering them online and at local stores.

Borrowers Who Take Out Multiple Loans

Borrowers who take out several payday loans at once may end up paying much higher interest rates than they would if they had taken out just one loan. If you need money right away, then it might make sense to borrow only what you need. Otherwise, you could find yourself paying hundreds of dollars in extra interest charges.

Debt Collection Practices

Many payday loan borrowers report receiving threatening phone calls from collection agents after missing payments. These collectors sometimes threaten legal action unless the borrower pays off the entire amount owed immediately.

High-Interest Rates

In general, payday loans carry high-interest rates. According to the Consumer Financial Protection Bureau (CFPB), the average APR for payday loans was about 566% in 2014. That means that the typical consumer paid back $566 for each $100 borrowed.

Poor Credit History

If you have a bad credit history, then you may find it difficult to get approved for a payday loan. Most lenders require applicants to have good credit scores before approving a loan. Lenders tend to give priority to customers with excellent credit histories.

No Guarantees

Lenders do not generally offer any guarantees regarding repayment. Instead, they rely on the assumption that borrowers will repay the loans. If you fail to pay back the full amount, then the lender may pursue legal action against you.

Alternatives

There are alternatives to payday loans. Many banks offer short-term loans without high fees. Other options include pawn shops, credit unions, and family members.