When you need quick cash, what could
be more convenient than taking out a same-day payday loan that is deposited
directly into your bank account? On your next payday - a week or two later -
the loan is automatically repaid because the creditor has your bank
information. Sure, there is a fee, but there's no credit check, no collateral,
and no lengthy application process like there is for a personal loan. You just
walk into the payday loan office or go online, fill out a few forms proving
that you have a steady job and a checking account, and you get up to $2,000 the
same day.
It sounds easy, but it may not be
such a good deal. Payday loans are defined as short-term loans with an interest
rate above 36%. That sounds like a high rate, doesn't it? After all, you see
new car loans advertised for zero percent, and home mortgages for 6%. Personal
loans from banks are generally between 10% and 15%. Even credit card cash
advances can be cheaper. A $300 cash advance on the average credit card, repaid
in one month, would incur a finance charge of $13.99 at an APR of 57%.
To make it sound less expensive,
payday loan providers don't advertise their annual percentage rate (APR) the
same way credit card and personal loan providers do. They state the interest in
terms of a fee per $100 loaned. Here's a typical example.
How the Fee Translates to APR
You walk into the payday loan office
or apply online. You need to borrow $500 until your next payday, which is in
seven days. The fee for your loan is $15 per $100 borrowed. You think,
"That's not so bad, it's 15%, isn't it"? You agree to the loan terms
and you give the lender a check in the amount of $575, dated in seven days.
When your loan is due to be repaid
in seven days the creditor will cash the check or debit your checking account.
If you have $575 in your account, then you are finished and the transaction is
completed.
ไม่มีความคิดเห็น:
แสดงความคิดเห็น