Payday Loans

APRs of comparable fees and credit costs

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*advances are not annual; figures provided for comparison only
If you get a 45 day installment loan for $100 with a $15 loan feeyou pay 122% APR*
If you have a 14-day, $100 no fax loan with a $15 loan feeyou pay 391% APR*
If you have a $100 bounced check with a $34 NSF fee to be repaid in 10 daysyou pay 1,241% APR
If you have a $100 debit card overdraft with a $37 fee paid back in 5 daysyou pay 2,701% APR
If you have a $100 utility bill with $46 late/reconnect fees to be paid within 14 daysyou pay 1,203% APR

APR: The equivalent annualized percentage rate for payday loans and other short-term installment loans ranges from 547.5% to 999.45%, based on the amount and the length of the loan.  Larger loans with longer payback periods have lower interest rates.  While this sounds large, one must consider that these loans are only meant to be for a very small time-frame, usually 2 weeks.  Annualizing other fees in the same manner results in APR of 2336% for a returned check fee of $32 against a $100 check, a 965% fee against a $37 credit card late fee or over the limit fee, or a 1203% APR for a typical $46 reconnect fee by a utility company.

Financial Implications: Short term payday loans are meant to be just that: Short term.  Typical fees range from $15 to $40 for every $100 borrowed up to $500.00.  Fees per $100 begin dropping on loans larger than $500.00.  Fees are typically less than what borrowers can expect to pay for bouncing a check, having a utility disconnected, or paying a credit card bill late.

Collection Practices: Collection practices will vary from State to State and Lender to Lender. Some common methods if a loan becomes delinquent include, attempts at collections internally, primarily through telephone, an attempt to work out a pay-off arrangement that takes into strong consideration the financial condition of the borrower, and other internal attempts. Often, after all attempts at internal collections have failed, the lending agency may send the loan to a third party collection agency in an attempt to recover the funds lent in good faith, or may take other action within their legal rights. Check with your lender and your State regulations to be informed of the collection practices used by your lender.

Payday Loans

Credit Score Impacts: Short term, payday loan lenders may rely on any of the three (3) major rating agencies – Equifax, Experian, or Transunion. Generally, the borrower doesn’t have to bear concern that their score may be affected by having the loan request determined by results from these agencies, however, such determination is solely in the discretion of the payday loan lender(s), which may result in the lender(s) submitting, among other things, the borrower’s request for the loan, or the subsequent payment(s) under the loan to any of these agencies. Short term lenders may also rely on their own scoring criteria, which is generally based on income and ability to repay, as well as the borrower’s payment history of any previous payday loans that have been made with the lender in question, or with other payday lenders.