Payday Cash Advance - Understand The Fees
Cash advance loan fees can be somewhat difficult to understand
at first. First you will be given an APR rate for the year, but
cash advance loan terms are only for 1 to 30 days. Then you have
fees that are separate from the interest rates. All of it can
seem confusing unless you understand the purpose of each figure
and how to compare them.
The Purpose Of APR
The APR (annual percentage rate) includes interest and fees paid
over a year for the loan amount. In an effort to educate
consumers on the long term cost of such loans and to provide an
easy way to compare lenders' fees, the APR is required to be
posted by the US government.
This makes researching rates easy. Simply look for the lowest
percent. If you can't find the rate on a lender's site, then
request it before applying. If you still don't receive an
answer, skip the lender since they appear to be a shady lender.
However, while an APR helps you compare cash advance companies,
they don't tell you the real cost of the loan. Most consumers
only take a cash advance until payday, usually less than 17
days. So to understand your loan's cost, you need to look at
both rates and fees.
Cash Advance Fees And Interest Rates
Fees and interest rates are usually stated up front by cash
advance companies. There might be an application or processing
fee, just like with any typical loan.
To know the actual percent the fees will be, simply divide the
total amount due on your next payday by the fee, which also
includes interest. For example, the cost of a $100 loan might by
$20 dollars. By dividing 20 by 100 (20/100) you get .20, which
is 20%. A very different number than the APR.
Fees Out Of Hand
Fees can get out of hand if you don't pay back your cash advance
on your next payday. In addition to your interest rate charges,
you will also incur late fees. If you need money for a longer
period, it is better to use a credit card or other form of
credit.