Ads on payday loans make it look like a quick, easy, meaningless way to get money when you’re in a financial bind. They say you get $ 100 as easy as the heel shows recent wages, a copy of your driver’s license, and a blank check. They do not tell you that for many people, paying off that $ 100 could end up taking months, even years, and it costs thousands of dollars to pay off.
How Payday Loans Works
Let’s say you need to borrow $ 100 until the next payday.
The lender writes a verified check for the amount of the loan plus the fee. Lenders calculate a payday loan fee in one of two ways: as a percentage of the amount you borrow, such as 10%, or as a fixed amount for each $ 1 alias, such as $ 15 per $ 100 alias.
After you write the check, the lender gives you cash or automatically deposit the loan into your checking account. Then, on your payday, the lender spends your check only if you extend the loan. The loan extension, also known as the “rolling” loan, charges other fees and allows you to keep the loan for another period.
What is the cost of payday loans
The truth in the lending law requires all lenders, including lenders on online payday loans, to disclose the cost of the loan in writing before signing any agreement to obtain the loan. This information should give you in terms of financing fees and annual annual rate of return (APR).
Even after reading this information, you may not only understand how expensive your payday payments are.
For example, a one day payday lender, Cashcentral.com charges $ 17.50 per $ 100 borrowed. On a 10-day loan, your actual APR is approximately 640%! This is 15 times more than some of the most expensive default credit card rates.
If you have taken a $ 14 14-day loan and can not repay it for 2 months, you would end up paying $ 210 in a payday loan fee.
A 2006 report by the Responsible Lending Center reveals a typical payday borrower ends up paying $ 793 in interest on a $ 325 loan. This lender does not charge high advance financing fees. Instead, the borrower pays this amount over a period of time through the continuous decline of the loan.
Borrowers often find themselves taking new payday loans to cover old payday loans and end up paying thousands of dollars in a few hundred dollars of debt.
Demonstrate on the poor and the military
Time and time again, statistics show that payday loan companies aim to benefit from poor consumers. You will rarely find any payday loan stores in the upper middle class suburbs of the city, where borrowers can actually afford to repay loans. Instead, you will find them in the slums and blacks of the city and nearby military bases. For example, Yahoo Maps search resulted in 12 cash and payday loans within 5 miles of Fort Knox, Kentucky, a US military location.
Alternatives to Day Loans
You are not entitled to lend full-time loans without providing some alternatives.