Why Payday Advances Have High APR And Why That’s Not ‘Bad’

Mickey | Financial Services | Sunday, January 23rd, 2011

Instant cash online is a great way to get money when you need it, and you aren’t limited to just the handful of payday loan offices through your neighborhood. Instant cash advance loans for your payday can be a great way to get you out of a lot of trouble very quickly.  Simply get online, type in a few words in the search engine, and click around until you find a website company you like the reviews for.  If you check information on them, you’ll often hear that their interest rates are very high.

Very high compared to what?  The average APR for banks is very low–they make their money over a very long period of time.  A credit card loan for five hundred dollars that only requires fifteen dollars a month for the minimum payment at an 18% interest, which is a very common interest rate, will mean you have to pay the bank $198.34 in interest.  It will take you nearly four years to pay off the bank, and they will walk away with $198.34 dollars of interest, meaning you will have paid them nearly seven hundred dollars for a five hundred dollar expense. They don’t need to charge a high APR to make a lot of money.

On the other side of the scale, a loan from a pay day location that charges a ‘whopping’ $228.25% of the APR for a five hundred dollar loan that is supposed to be paid off in fifteen days will mean if you pay it off, your end fees will be $546.88. It will only be about fifty dollars on top of the five hundred dollars, as opposed to nearly two hundred dollars on top of the five hundred dollars.  The reason people freak out about the pay day loan payments is they expect the money back quickly so both you and they can get on with their lives.

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