Are Payday Loans Really that Bad?
Despite their often negative belief, there is considerable support for the practice of payday lending, and when considered mathematically their validity claims are argued. When calculated on an annual basis, the fees charged on payday loans are staggering like 400%, but this is not entirely true if you consider that these loans are only held for a week or two.
Are done. If a borrower took a conventional loan at an APR of 10%, the final cost of the loan would be $ 330, while the final cost of the loan would be $ 345, not too much, with a payday loan fee of $ 45. However, the APR on that loan will be at a rate of 391%.
To further justify the fees charged by payday lenders, consider that the average loan taken out is about $ 375, so the fee should also be higher to stay in business with such low overhead. Not to mention that with so many pendent lenders in business today, competition for the market can be fierce, often with fees being low.
Proponents of payday loans cited car rental as an example. If you calculate the fees charged for renting a car for a few days you will end up with similarly high annual interest rates, but there is no dispute with the car rental industry. As soon as you rent a car, consider taking a payday loan to rent money for a couple of weeks. When you get cash in your hand, it can be difficult.