How Payday Loan Interest Rates Are Considered
It is critical to have a plan when you come into hard times. Everyone would love to have plenty of cash available for emergencies. But reality can be harsh, and most people have less than 3 months of spendable cash. Many have even less and live from paycheck to paycheck. This is where payday loans come into play. You can keep creditors like utilities off your back by lending you money for a short time for an emergency.
Many ask, “what are the interest rates” for payday loans. This is because credit companies and banks focus on interest rates. This is fine when you are getting a loan for a long period, as with home and auto purchases. It’s important to understand how interest rates work for longer-term borrowing. The interest rates may be high for short-term payday loans but are irrelevant.
How It Works
The cost of a loan centers on two things: APR and the loan’s length. In the case of a payday loan, the two factors are fees and the length of the loan. For example, a $500 balance with a high 1,500% APR will accrue $500 interest over three months. However, the amount drops to $130 if the loan length is reduced to a month without lowering the APR. Payday loan lenders disclose the exact fee you are charged for your loan and the due date. APR is not a factor since the loans are for one month or less in most cases.
But What Are the Interest Rates?
Each state regulates interest rates (even on payday loans). In most states, the typical annual percentage rate rarely exceeds 36%, the same max rate for credit cards.
So, a $500 loan for a single month would have a $16 fee for the loan.
Can I Get a Payday Loan Anywhere?
No, you cannot because certain states have banned payday loans as they do not feel it is best for the public. New York is an example of this. But they allow a utility to shut you off, charge you penalties, interest, exorbitant restart fees, etc.
In most of the U.S., the government and the states have worked to regulate the industry and keep interest rates reasonable. An example is the District of Columbia, whose interest rate is capped at 24%. This is the same as loans from banks and credit unions.
How to Use Payday Loans Correctly?
Payday loans are not to be used except for emergencies. You should not consider getting one if you cannot pay off the balance in the next month or when the payback is due.
You should only consider an online loan if:
- You do not have the cash on hand you need,
- You have no other alternatives (such as a yard sale, friends/family support)
- You can afford the total loan cost and repay on time.
Online payday loans are a good choice if you can repay the loan when due.
The Benefits of Online Loans
There are advantages to using online loans. You do not have to provide any security or collateral for the loan; you can qualify even with poor credit. You can request the loan in minutes and, if approved, get your money in just one business day. So, speed is a big benefit. Payday loan interest rates are capped, so the crazy stories about them are no longer valid.
Requirements for Payday Loans Online
The simple requirements for requesting an online loan are:
- Be 18 or older
- Have a checking account
- Have a current income of at least $1,200 a month
- Have a phone number and email for communicating
- Be a US citizen or legal resident (with proof).
Need cash fast for your car/truck work? An emergency car loan can help you when you need it most. Consider that CashinaMoment has a large referral network of direct lenders to serve people needing online or car loans. Open 24/7 and 365 days a year, serving Americans coast-to-coast.
category: Online Loans Services
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