What Determines Payday Loan Interest Rates?

Payday loan interest rates are regulated by state and federal law. Payday loan interest rates are expressed by using an Annual Percentage Rate (APR).  The amount charged for a payday loan is the amount a customer borrows, plus the interest, or finance charge.  This amount is a one-time fee that will vary depending on how much a customer is borrowing.  A customer’s fee rate will also vary, depending on the lender.

How Are Payday Loan Interest Rates Calculated?

Federal law requires that fees for any financial transaction be expressed to a customer in terms of annual percentage rate, or APR.  APR assumes that the borrower will take a year or more to pay the loan off.  Typically a payday loan is a two-week loan, so payday loan interest rates can often seem very high.  This is because APR is listing a one-time fee in terms of an annual or yearly charge.  Lenders show payday loan interest rates in terms of APR to comply with the law.  Payday loans are not intended to be taken out for a year or longer.

What Should I Look For When Shopping Payday Loan Interest Rates?

Before taking out a payday loan, always consider methods to lower your costs. Compare rates when shopping for a payday loan or use a loan matching service like Green Leaf Loan Group that will match you with the best lender based on the information you provide.  If nothing else, you’ll get a lower rate loan.  You will also educate yourself on payday loan interest rates.  Remember, payday loans can be expensive.  When applying for a payday loan, make sure you know the facts.  Look for the best payday loan interest rates, ask questions, and pay back any loan you take out as soon as possible.  With knowledge, payday loans can be a great solution-quick and confidential!

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by “Heather Wilson“