Know The Real Cost Of A Payday loan
Alice Smith
July 16, 2008
If applying for a cash advance, it is important that you understand the real cost of payday loan. When one applies for a cash loan, as the name suggests, the loan companies charge an extra $10 for every $100 that is borrowed. This sounds quite simple; however, one needs to understand the working of the cash advance service in depth to fully grasp their operations.
Flat Fees
Payday advance loan companies do not charge an interest rate like the traditional loan companies. Instead, they charge a financing fee at one go. The reason for going in for a flat financing fee is that these 10 dollar payday loans are usually for two weeks, which is a short time period. Also, these loans are marked with no application charges or daily interest rates as is a usual case with traditional loans. Hence, flat fees work more in favor of these companies.
Moreover, this flat financing fee would be different from one company to another. Each of them has its own way of working out the interest rates. Hence, it is important that before becoming a borrower, you look around the block for a good deal.
Government Rules
As per the government rules, all the cash advances that include the ten dollar payday loans, are filed as annual percentage rate. The government requires this to make comparisons between all types of credit that are given out by the loan companies or financial institutions in the form of credit cards, loans, home equity credit etc.
It is found that these loans have a higher annual percentage rate than the traditional loans. This can be attributed to the fact that they are short term ones, have higher risks involved because of no credit checks etc.
Despite the reason that these loans are marked by high annual percentage rates, they are still preferable because, in reality, the cost of payday loan works out in the favor of the borrower. The borrower does not have to go through lengthy verification processes, long waiting periods, etc. for the loan sanction. The mental relief that one gets from these loans is incomparable to any other form of cash advance in the market.
A customer would any day prefer comfort over paying a few dollars extra. Hence, when it comes to comfort and customer service, there are no cash advance services available in the market at present that can match these emergency cash loans. This is also the reason why ten dollar payday loan companies are flourishing so well in the market today.
Cost of payday loan works out to be in the favor of the customer as this service provides great mental comfort. Cash advance service means a hassle free, quick solution to one´s cash crisis which is preferred over paying a few extra dollars to cash advance services.
Flat Fees
Payday advance loan companies do not charge an interest rate like the traditional loan companies. Instead, they charge a financing fee at one go. The reason for going in for a flat financing fee is that these 10 dollar payday loans are usually for two weeks, which is a short time period. Also, these loans are marked with no application charges or daily interest rates as is a usual case with traditional loans. Hence, flat fees work more in favor of these companies.
Moreover, this flat financing fee would be different from one company to another. Each of them has its own way of working out the interest rates. Hence, it is important that before becoming a borrower, you look around the block for a good deal.
Government Rules
As per the government rules, all the cash advances that include the ten dollar payday loans, are filed as annual percentage rate. The government requires this to make comparisons between all types of credit that are given out by the loan companies or financial institutions in the form of credit cards, loans, home equity credit etc.
It is found that these loans have a higher annual percentage rate than the traditional loans. This can be attributed to the fact that they are short term ones, have higher risks involved because of no credit checks etc.
Despite the reason that these loans are marked by high annual percentage rates, they are still preferable because, in reality, the cost of payday loan works out in the favor of the borrower. The borrower does not have to go through lengthy verification processes, long waiting periods, etc. for the loan sanction. The mental relief that one gets from these loans is incomparable to any other form of cash advance in the market.
A customer would any day prefer comfort over paying a few dollars extra. Hence, when it comes to comfort and customer service, there are no cash advance services available in the market at present that can match these emergency cash loans. This is also the reason why ten dollar payday loan companies are flourishing so well in the market today.
Cost of payday loan works out to be in the favor of the customer as this service provides great mental comfort. Cash advance service means a hassle free, quick solution to one´s cash crisis which is preferred over paying a few extra dollars to cash advance services.