Calculating the Real Cost of Payday Loan

Payday loan is a good source of quick cash if your payday is still several days away. By taking out a payday loan, you can pay your bills without incurring large interest rates and attend to your emergency needs immediately. However, you first need to know the real cost of payday loans to avoid living from paycheck to paycheck.

Interest rates and other fees to consider

Payday loan companies don’t check for credit history. But in place of this risk, they charge higher interest rates. You also have to pay for penalty fees if you miss the repayment schedule, which is usually set by the time you can get your next paycheck.

Steps on computing the total amount of loan

Step 1: Look for a loan calculator.

If you’re not good with numbers, you can just look for online loan calculators to do the accounting for you. Make sure that the loan calculator has relevant fields for information such as the interest rates and loan amount.

Step 2: Get the needed numbers for computation.

List down the the amount of payday loan (without any fees applied to it), APR (annual percentage rate), monthly interest rate, and loan term (in days). For payday loans, you normally have an interest of $15 to $30 for $100 you owe. The scheduled repayment can be within 7 to 14 days after you received the loan.

Step 3: Use the loan calculator to determine the APR and monthly interest rate.

Some payday loan lenders don’t provide any percentage rate for the interest charged. They just give you the exact amount you have to pay along with your loan. By computing the APR and monthly interest rate, you’ll know if the lender will be charging you more than 60% or are actually giving you a very good deal.

calculating cost of payday loan

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Step 4: Consider the cost of loan when you default.

Consider the possibility of missing your deadline for repayment. Add the penalty charge or late fees that will be added to the amount of your loan. Look for lower interest rates so you won’t be trapped paying back the loan paycheck after paycheck.

Tips to save on cost of loan

You have to keep in mind that delayed payment makes any type of loan more costly. This is why you have to pay your loan on time or at least ask for loan extension before the due date. You can also save on loan cost if you choose a payday loan with a lower APR and monthly interest rate. In choosing a loan company, don’t just consider the fees, take into account the term of the loan.

Related questions:

1. Can I borrow more than the amount of my monthly salary with payday loans?
2. Is repayment only scheduled 7 to 14 days after I received my loan?
3. What’s an acceptable APR for payday loans?
4. How can I find a low cost payday loan?
5. I’m bankrupt. Can I still get a payday loan approval easily?

Related posts:

Low Cost Payday Loan -Information on low cost payday loans
Lower Payday Loan Cost -On keeping the cost of your payday loan low
Fast Payday Loan -All about applying for a fast payday loan.

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