| Ever wondered why a payday loan interest rate | | | | |
| is higher than a bank's personal loan The | | | | A payday loan charges a flat fee, which is |
| truth is, payday loans don't have an interest | | | | fixed per loan amount. This causes the Annual |
| rate... instead a fee is charged. | | | | Percentage Rate (APR) to vary depending on |
| | | | the number of days between the date the |
| Why is a payday loan interest rate higher | | | | payday loan was activated and the date it was |
| than a bank personal loan? | | | | repaid. There is no refund of fees for early |
| | | | repayment. |
| A payday loan is a short term, high risk | | | | |
| loan, and is offered to anyone with no credit | | | | Payday loans are short term advances which |
| checks. Generally, payday lenders do not | | | | recipients should repay quickly. Although |
| charge an interest rate, but instead charge a | | | | payday lenders charge a flat fee, they must |
| "flat fee" based upon the loan amount and the | | | | provide calculations as to their interest |
| date the loan is repaid. Because of the | | | | rate. Due to various Truth-in-Lending laws, |
| lender's high risk and the short term of the | | | | disclosures must be expressed as an Annual |
| loan, by comparing the fee to that a typical | | | | Percentage Rate (APR), or the cost of the |
| bank personal loan, the interest rate | | | | credit advanced expressed as an annual rate. |
| calculation is higher. | | | | This requirement provides uniformity among |
| | | | various lender resources, so borrowers can |
| Typically, payday loans are short term | | | | compare rates. |
| advances which are due on the following | | | | |
| payday, unless the payday is four or less | | | | Most payday loan lenders require an active |
| days away from the loan date. In such | | | | checking account, but some will offer a bank |
| instances, loan repayment becomes due on the | | | | savings account payday loan. And there are |
| subsequent payday, with a maximum loan term | | | | lenders who offer a no fax payday loan. |
| of 16 days. | | | | |