Look Before You Leap - The Basics of Payday Loan Rates

Not all payday loan finance fees are created equal. If you're looking for a payday loan service you probably need cash quick, but it still pays to do a little research into the rates charged by different companies before you borrow. A little smart thinking can go a long way when it comes to payday lending. All payday lenders have conditions for borrowing, and some might not be entirely clear. Ask for a detailed explanation before you submit an application if you don't understand the terms of the cash advance.

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Some lenders are more upfront with their fees, and you should be suspicious of those who do not clearly disclose how much you can expect to pay for finance charges. Undisclosed or hidden fees could make it difficult or impossible to repay your loan on time. Payday advances are convenient, but the fees you'll pay for them are steep. Finance charges can be from $10 to $30 per $100 borrowed, but typically range from $20 - $25 for each $100 increment. Some companies try to exploit customers looking for emergency financing, so knowing the "going rate" in the market is critical.

You'll be paying a premium to get your cash quickly, but comparing rates first can save you money. Comparing rates can be confusing, however. Each company can have a different way of calculating their finance fees, so you should ask companies for their APR (annual percentage rate) and EAR (effective annual rate). This will allow you to effectively compare rates side-by-side and help you make an informed decision when it comes to borrowing. Though you'll be looking for a good deal, be cautious when rates seem much lower than those offered by other companies. If the rates seem too good to be true, they probably are.

Some companies might try to scam customers by offering initially low rates, but apply conditions that make it difficult to repay the loan on time or increase the finance fees to an astronomical amount if you need to rollover the loan. Most people expect to pay the loan on time and don't anticipate having to rollover the loan. Rollover fees can be avoided by repaying the loan on time, but circumstances might arise that keep you from making the repayment deadline. It's important to know what the "maintenance fee" is in case you have to request an extension. If you have to rollover the loan, it can save a lot of money in the long run.

You should also find out if the company you borrow from automatically renews the loans by withdrawing the finance charges electronically from your checking account on payday. If your checking account has insufficient funds, you'll be hit by fees from both the lender and the bank, and potentially be worse off than you were before you got the loan! Today's economy means there are more customers in need of emergency short-term funding, and more people applying for payday loans. There are also more companies getting into the game of payday lending. Protect yourself by looking before you leap. When you need an emergency loan, it pays to shop around.

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