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