Payday Loan Rates

The Extravagant Cost of Payday Loan Rates

If you're thinking about acquiring a payday loan, you should give the matter some serious consideration before making a final decision. While these types of loans offer quick cash with no credit checks, payday loan rates are incredibly high. Establishments such as the Consumer Federation of America advise people to stay away from these types of loans if at all possible, because of the unbelievably high rates.

How high? Well, that depends on the company, but it's not uncommon for a consumer to end up paying an annual percentage rate of 700% or more. With costs like that, it's a wonder that anyone ever uses these companies. But, they do. People with a desperate need for fast cash are often willing to risk paying high rates to get the cash they need. They think that they'll pay the loan off quickly and avoid racking up extravagant costs. Sometimes, that's true, but often times not. Let's look at an example:

Suppose you head to your local payday loan provider and request to borrow $100. You are informed that there will be a $40 charge. You fill out all the paperwork and get your $100. In a week when the loan comes due, you realize you don't have the $140 necessary to pay the loan back. When you call the company, you're told that you can choose to pay the $40 (or perhaps even more) and renew the loan. The more times you renew the loan, the more fees you rack up. You might end up paying hundreds of dollars before all is said and done. Many people spend months, or even longer than a year, simply paying these renewal fees and interest rates without ever making a dent in the actual amount they borrowed.

Not only are there these types of loan providers likely in your area, there are hundreds of them online. Getting a payday loan online can be a financially dangerous thing to do. After all, you'll be giving a company that you know nothing about access to your checking account and personal information. If you get scammed, it's hard to protect yourself because these online companies are difficult to locate. Some of them are even in foreign countries!

Because of the ridiculously high payday loan rates that are charged, consumers are advised to steer clear of payday loans unless completely necessary. Your best bet is to exhaust all other possibilities for getting the money you need before turning to one of these lenders.

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