How do payday loan rates differ from other financial products?<\/h3>
Payday loans have higher APRs compared to credit card cash advances and personal loans for bad credit. Credit card cash advances typically have a 23% APR plus a fee, while bad credit personal loans max out at 35% APR.<\/p>
Let’s go back to the $900 example. Here’s how the costs would compare:<\/p>
| <\/th> | Payday loan ($14 for every $100 borrowed)<\/strong><\/th>| Credit card cash advance (23% APR + 5% fee)<\/strong><\/th> | Personal loan (35% APR)<\/strong><\/th><\/tr><\/thead> | Loan amount<\/td> | $900<\/td> | $900<\/td> | $900<\/td><\/tr> | Loan term<\/td> | 21 days<\/td> | 21 days<\/td> | 6 months<\/td><\/tr> | Borrowing cost<\/td> | $126<\/strong><\/td> | $11.91 + $45 = $56.91<\/strong><\/td> | $165.68 monthly payment, $94.08<\/strong> in total interest<\/td><\/tr><\/tbody><\/table> | The credit card cash advance is the cheapest option. The costs of the bad credit personal loan and payday loan are almost the same in dollar terms. The key difference is the loan term; the personal loan has a longer loan term of six months, allowing you to spread out your payments.<\/p> Unlike other types of loans, the borrowing fee of a payday loan is the same for borrowers and does not depend on personal factors, such as credit score and income. Lenders in the payday loan space tend to charge the maximum they’re legally allowed to, no matter your financial situation.<\/p> The payday loan’s APR, however, can change depending on your loan term. Let’s go back to the $900 loan example with a borrowing fee of $126:<\/p> Even with the maximum loan term allowed for payday loans, the APR is still very high.<\/p> |
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