The Actual Annual Percentage Rate of Payday Loan Companies
Payday loans are probably not the best source for a loan. They charge a lot of money to those who need cash badly. Only when you get into its details, you will realize how bad the interest rate may be. The following article is written to educate you about Real PDL Help companies and what they’re doing for you.
How Does It Work?
Say you need to borrow money to pay rent, buy food, or to even buy that engagement ring you’ve been looking at. Now, if you are borrowing, then you apparently don’t have enough savings to cover the amount.
Say you go to a Payday Lender. They’ll ask not how much you have in your account right now, but what your pay stub is? When are you going to be paid next? And they may ask for some of your most recent bank statements.
The reason why they ask this is because they know you’re in a tight situation, but they need an idea of when you’ll be paid next and in what timeframe you can pay back the loan. For this, they have to make sure you have a job in the first place and get an idea of how much you make in a month. This confirms the return of borrowed amount.
What Will Payday Lenders Demand In Return?
Payday lenders’ job is to lend money, so they’ll ask you to write a check for every $100 you borrow. They will also ask you to pay interest on top of this amount. Assume you are borrowing money for two weeks. Still, the interest rate will remain the same, no matter if you are borrowing for a month or for a year.
Say they charge $25 for every $100 and you are borrowing $500. You have to pay $25 for each $100. In sum, you are paying $125 extra for only two weeks of borrowing money. You will have to write a check for $625.
What Are the Payment Options?
When payday arrives, you have two options. 1) You may rely on a payday lender and give them $625 in cash, and they will give you back that check you wrote for them. 2) You don’t show up and they end up cashing the check.
They are making sure that once payday arrives, they get the money first before the borrower can pay their rent, utilities, or food.
Is It a Good Idea to Get Such a Loan?
When it all comes down to it, this is probably not your best idea because you are paying an interest rate on every $100 that you borrow from them. If you calculate the annual percentage rate or APR for a 25% interest rate for the above example, you will be paying an APR % of 625. This is much higher in magnitude than credit card charges alone.
Be financially smart and avoid Payday Loans altogether. It all comes down to spending carefully and staying vigilant about such traps.
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