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 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
These personal loan interest rates are locked at the start of the personal loan and cannot be increased or decreased.
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?
Oak Park Financial 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.
two week payday loan fixed, borrow money, payday loans work, credit union, credit report, electronically withdraw money, payday loan secured, permit payday lending, unsecured personal loan, bad credit personal loans, debt consolidation, credit unions, storefront payday lender, maximum loan, average interest rate, monthly payment, prepaid card account, next paycheck, post dated check, auto loan online, direct deposit, consumer loans, credit card issuers, medical bills, installment loans