August 7, 2009, Newsletter Issue #69: Understanding Fees for Payday Loans

Tip of the Week

While emergency cash loans can do a lot of things, including help pay off bills or cover an unexpected loss, they also carry with them certain fees. In weighing the option to take a cash advance, you should know that the finance charges behind fees are not always certain. Most companies will charge you a set fee per amount borrowed. For example, let’s say you take out a $500 loan until payday to cover yourself for something unforeseen. The particular lender you deal with says that you have to pay $25 per $100 borrowed. That’s $125 out of the $500, leaving you with $375 towards your immediate needs.

That also means that you’ll be charged this for every payday that you delay paying the original loan back in full. This can amount to a huge APR if you let your loan drag on indefinitely, sometimes in the hundreds or thousands of percent!

In addition to these financing fees, you may also subject yourself to an additional “rollover fee” or late payment fee for continuing your loan beyond the due date. If the lender tries to debit your bank account for the money when promised and the money isn’t there, you could subject yourself to further fees, including overdraft or insufficient funds fees from the bank, and open yourself up to potential credit harm.

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