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Fixed And Variable For Payday Loans: What You Need To Know

By May 21, 2022June 29th, 2022No Comments
Fixed And Variable For Payday Loans

Payday Loans And Fixed And Variable APR – What You Need To Know

Payday loans are notoriously costly forms of borrowing. Their APR, however, is often not clear at first glance. Payday lenders often refer to the cost of the loan as a flat fee rather than an interest rate. 

This raises the question: how do you determine the cost of payday loans? What is the real interest rate of payday loans? 

Learn more about payday loans and their real interest rates here.

Do payday loans fixed or variable interest rates?

Payday loans are fixed-interest loans in theory. The cost of a single payday loan should never surprise a borrower who pays it off on time.

Defining payday loans

Payday loans can be short-term and costly loans. Payday loans are offered in small amounts. The maximum loan amount is mostly 0.

Payday loan borrowers are required to pay the original balance and lender’s fees back two to four weeks after their next payday. If they do not pay, the payday lender may try all ways to get the funds back, whether legal or illegal.

What you need to qualify

Payday loans have lower qualification requirements than the average. Online lenders offer these loans to people with poor credit or limited credit histories as a way of making ends meet.

What you need to qualify

Many payday lenders rarely report payment histories to credit bureaus. This means that payday lenders are not available to borrowers with poor credit. However, they can be used to help rebuild their credit scores.

Fixed and Variable Loans

Fixed loans

These personal loan interest rates are locked at the start of the personal loan and cannot be increased or decreased.

Variable loans

The interest rates in these loans can change during repayment, depending on many factors.

Both interest rates are risky for the borrower. Variable rates, however, can be tricky. 

Loans with fixed rates are not a good option as they can limit the borrower’s ability to save money. Loans that have a variable rate can be subject to unexpected price increases.

Lenders want the flexibility to increase their rates, particularly for long-term loans. In return, they will usually offer convenient terms, like a lower rate at the beginning, but with more flexibility.

Fixed loans are usually at a higher interest compared to variable loans.

What is the Difference between Fixed and Variable Payday Loans?

Technically, payday loans are fixed-interest loans. The cost of a payday loan should not surprise borrowers who take out one and pay it back on time. Although the lender cannot charge fees beyond what was agreed upon, predatory lenders might change that rule.

Payday loans can be expensive, so it is difficult to pay them back on time. In 2020, the average payday loan had a balance of $375. The average payday loan costs $75. This is a 521% APR. The average credit card’s APR was 15% in the year 2020.

Payday lenders will charge additional loan fees if you fail to borrowers repay your payday loan. While trying to collect, payday lenders can penalize borrowers by charging penalties, late fees, and even extra fees.

In theory, payday loan rates can be fixed. They are not expensive and may quickly become prohibitive if a borrower defaults.

Are You Still in a cycle of payday loan debt?

OakParkFinancial can help you apply for payday loans but have trouble paying them back. We are experts in assisting borrowers to escape the prison of payday loans.

Payday loans tend to offer fewer qualification standards than most other types of loans. Lenders promote them as a method for persons with weak credit or a limited credit report to get by.

The most appropriate emergency could be a vehicle repair, medical assistance for your family or you, or travel expenses for your job. This service is not designed to solve every financial credit requirement. Alternative credit options including cash advances from credit card cash advance, lines of credit for home equity, existing savings, or borrowing from a family member or friend could be less costly and better suited to your financial requirements. Refinancing is possible but is not automatic. Refinancing can be subject to additional finance charges.

Get in touch with us today to get your installment loan paid off. A credit check will almost certainly be performed, and your creditworthiness may determine your rate and terms. The lender may verify your income or borrowers bank account, but your credit history is rarely checked.

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Frequently Ask Questions

A payday loan (sometimes referred to as a cash advance or a payday advance) is a small loan borrowed for a brief period of time, often until the borrower's next payday. These short-term loans feature high interest rates and need no collateral (unsecured loans). It is not advised to use payday loans for an extended period of time. The rates and terms of payday loans vary by state.

A title loan (sometimes referred to as a title pawn or a car title loan) is a short-term loan where the vehicle title serves as collateral. Due to the fact that lenders of title loans do not verify borrowers' credit histories, these loans are popular among those with poor credit. Typically, title loans are taken out by borrowers who need cash quickly or have financial issues.

Unsecured loans, such as payday loans or installment loans, are supported solely by the borrower's creditworthiness, as opposed to secured loans, which need collateral. Secured personal loans include car title loans and pawn loans, for example.

State rules determine the maximum amount you can borrow as a short-term loan. In certain states, short-term loans (also known as payday loans) are prohibited, while in others they are permitted with a maximum loan amount. Visit our rates and terms page to get state-specific lending conditions. In addition to state legislation, additional factors may alter the conditions of your loan.

A personal loan that is repaid over time with a predetermined number of periodic payments or installments is known as an installment loan. Due to the lower APR, installment loans can be taken out over a longer term than payday loans. Installment loans are commonly seen as a preferable alternative to payday loans. Typically, installment loans are repaid in predetermined amounts that include both principal and interest.

The Annual Percentage Rate, or APR, is an annualized version of your interest rate. When picking between several types of loans, the APR assists in comparing the costs of each. The annual percentage rate (APR) for a loan may include costs, such as origination fees. Remember that while APR is essential, it is only one of several elements to consider when selecting a loan.

Yes. Your credit score is not the only criteria taken into account when analyzing your loan application. However, a low credit score can result in higher interest rates and fewer lending possibilities. A title loan is a popular option for consumers with poor credit because title loan lenders do not consider credit history.

Credit score ranges differ depending on the credit scoring algorithm employed and the credit bureau that generates the score. According to FICO, a credit score between 300 to 579 is poor or very poor. A satisfactory credit score ranges from 580 to 670. Credit scores are determined differently depending on the credit scoring model's parameters, such as payment history, amounts owing, length of credit history, etc.