Payday loans are cash advances on a paycheck, not to be confused with ‘personal loans’. A payday loan is typically very small amount of money ($100-$1000) which has to be repaid when the borrower gets their next paycheck.
The interest rate for payday loans in USA can range from $15-20 per $100 borrowed for a two weeks term. The fee is around $5 for every $100 borrowed and some payday loan agencies can charge additional fees of $10-15 on top of that.
The average interest rate for a payday loan in USA is 455% per year (annual interest rate) or 521% per year (APR). That means if you borrow $100, you will have to pay back $455 in one year or $521 if you choose to repay 1 month sooner.
Because of the small amounts and short term, payday loans are only intended for those who do not qualify for other forms of credit and cannot borrow any other way (e.g., credit card). Payday loans are frequently used by people who are in emergencies, have an unexpected expense or simply don’t have enough money in their bank account.
A majority of payday loan agencies in USA are member of the Community Financial Services Association (CFSA) which has over 1400 members. These agencies abide to CFSA’s Code of Practice .
It is possible to search for payday loan agencies near you at the CFSA website .
Quick Payday loans are legal in 27 states, but are prohibited by state law in 13 other states. For more information on whether payday loans are available to residents of your state, see here.
Overall, payday loans are best used as a short-term credit solution for those who have no other options. If you are considering using payday loan services for your financial needs, it is highly recommended that you check out all the different alternatives (e.g., credit cards with lower interest rates) and use a comparison website like Smart Loans USA to estimate which option would be best suitable for each of your case.
Payday loans may not be for everyone, but if you are in an emergency situation and have no other options, it may be your best shot.
For more information on payday loans in USA you can check out Finance Guider.