Are you considering a payday loan? If so, be very careful. Payday Loans, often called advance loans, check advance loans, or deferred deposit loans, come with a very high interest rate and are very expensive. Payday loans should be your last resort if you need to borrow money. But, if you need money to meet a short-term cash crunch, a payday loan might be what you need.
Payday Loans are usually secured by a personal check to the lender for the amount that the borrower wishes to borrow -- plus a fee. The borrower gets the amount of the check less the fee and the fee is based on the amount that is borrowed. If you extend payday loans for a longer period than originally agreed upon, you will pay additional fees for each extension.
Like all Lenders, the institutions that issue payday loans are required by law to disclose the costs involved in the loan. Pay close attention to the finance charge and the annual percentage rate. Make sure that you shop around to get the best deal that suits your own needs, and if the interest rates are very high, you should try to only borrow the minimum amount you need and make every effort to repay it as quickly as possible.
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Read a personal story about payday loans and gain a better understanding of what's involved.
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Amortization: the process of paying off a loan and the accrued interest over time in regular payments. Amortization allows the payment amount to remain the same each month, even though interest continues to accrue. Different portions of the payment are applied toward principal and interest each time, depending on how the interest is calculated.
Collateral: that which you must hand over if you default on a loan. Collateral is used to ensure you make all payments on the loan. If not, you lose whatever it is you put up for collateral.
Simple Interest: the process of portioning monthly payday loan payments between interest and principal. It is calculated based on your unpaid principal balance, the interest rate on your cash advance loan, and the number of days since your last payment.
Term: the period agreed upon in which the borrowed loan amount is to be repaid.
| program | apr |
|---|---|
| 30 Yr Fixed | 4.54% |
| 15 Yr Fixed | 4.05% |
| 30 Yr Fixed Jumbo | 5.7% |
| 15 Yr Fixed Jumbo | 5.22% |
| 3/1 ARM | 3.56% |
| 5/1 ARM | 3.59% |
| 7/1 ARM | 3.82% |
| 10/1 ARM | 4.18% |
| 3/1 ARM (I/O) | 5.25% |
| 5/1 ARM (I/O) | 3.68% |
| 7/1 ARM (I/O) | 4.06% |
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If you default on your payday loans, the lender can take the same action as any other unsecured creditor to enforce a defaulted debt.
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