payday loans

Payday Loans Debt Information

Payday loans are advance loans that are secured by a personal check that is held until your next pay day. For example, if you borrow $100.00 for 14 days, the payday lender might ask you for a personal check in the amount of $115.00. The lender will then hold that check for 14 days until your next pay day. This means that the initial finance charge is $15.00. This might seem reasonable if you pay the loan back at the end of the borrowing period. In this case it appears that the finance charge is 15 percent. ($15 fee divided by $100 loan) However, when calculating the annual percentage rate (APR), the interest rate is actually 391 percent.

Doing the Payday Loans Math

In the example above, the daily interest is 1.0714 percent. (15 percent divided by 14 days) The annual percentage rate is 391.06. (1.0714 percent multiplied by 365 days) Payday loan companies are counting on you to roll that $100.00 loan over a few times because each time you do, in this example, they make $15.00 every 14 days. It’s easy money for them and expensive money for you.

Help with payday loans

There are very few ways to get help in paying off payday loans but there are companies that can successfully negotiate or settle them regardless of whether the loans have been sold off to a third party debt collector. Additionally, some credit counseling agencies do accept and attempt to consolidate your payday loans, if the creditors are willing. Keep in mind that if you choose to settle your loans through a debt settlement company, your credit score will suffer and you will be incurring settlement company fees. You should avoid settlement if at all possible and try to borrow cheaper money to pay off those high interest loans.

Be wary of companies claiming to stop harassing phone calls from collectors or claiming to stop the high interest fees from adding up. The fact is that no debt relief company has any more of an advantage than any other debt relief company. You are far safer sticking with the recognized companies in the debt solutions industry with proven track records and good ratings with Better Business Bureau.


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