Interest rates are being replaced by flat fees by more and more cash advance lenders. This is because the government has put on more rules. By charging a flat fee, lenders can avoid some of the limits that some states have put on how much they can charge.
Getting a look at interest rates
Payday loans usually have higher interest rates than other kinds of credit because they are for small amounts and have a higher risk level. Most online lenders still use interest rates to figure out how much you'll have to pay for a loan. You may also have to pay a service fee, but most cash advance companies will waive this for first-time borrowers.
The APR is the other interest rate to look at (annual percentage rate). All lenders must put this information on their website and in the loan agreement, whether they charge interest or a flat fee. The point of an APR is to help you compare different loans. But if you're like most people who take out loans, you'll pay back yours in 21 days or less and won't have to pay such a high interest rate.
Looking At Fees
Some states have put more restrictions on cash advance companies, so lenders are now charging fees instead of interest rates. In this way, they get around laws against "usury."
You can still use the APR to compare these companies to each other. You can also get a percent by dividing the fee by the loan amount. If the interest rate on a $100 loan was $18, for example, the fee would be 18 or 18 percent.
Things you need to know
When you compare cash advance companies, you want to look at numbers that are the same. Because of this, APRs can be very useful. You should also check the payment plans to make sure they are all the same. In addition to loan costs, you should also look at fees for extending the loan or making payments late. Also, make sure you can change the plan if you can't pay right away when you get paid.
If you think you won't be able to pay back your loan by your next paycheck, you might want to look into other ways to get credit. Long-term rates may be better with a personal loan or credit card.
