Payday Loan vs Bank Overdraft Fees

Payday Loan Data & Statistics:

Today, we will quickly cover one of the biggest misconceptions regarding payday loans: They are ultra expensive. If you compare the interest rates of a payday loan, to an interest free loan from your brother, of course, any rate will seem high, let's investigate farther.

Before we begin, lets start with the question; Are payday loans the right solution for everyone? Of course not. Many people in need of a loan can turn to family members and or credit cards. But when those options are not available often times a payday loan can be a very useful solution.

(Interested in a Payday Loan, Apply Here)

The Community Financial Services Association of America (CFSA), released a report recently highlighting myth vs. reality in the world of payday loans. According to the CFSA,

The Myth: Payday loans are extremely expensive and have exorbitant interest rates.

Reality:
Payday loans are two-week loans—not annual loans! Industry critics quote the “390% annual percentage rate” to misrepresent the truth and to help make their case. The typical fee charged by payday lenders is $15 per $100 borrowed, or a simple 15 percent for a two-week duration. The only way to reach the triple digit APRs quoted by critics is to roll the two-week loan over 26 times (a full year). This is unrealistic considering that many states do not even allow one rollover. In states that do permit rollovers, CFSA members limit rollovers to four or the state limit—whichever is less.

But, even if the loan was rolled over for the entire year, the high APR of payday loans pales in comparison to the realistic alternatives considered by consumers.

How does a $100 payday loan compare?

$100 payday advance with a $15 fee = 391% APR
$100 bounced check with $54 NSF/merchant fees = 1,409% APR
$100 credit card balance with a $37 late fee = 965% APR
$100 utility bill with $46 late/reconnect fees = 1,203% APR.

It is this type of data that allows us to feel as though we are offering a useful service that is needed in the community, not one that is a blight to people in need.

(Interested in a Payday Loan, Apply Here)