How to Be in the Know About True Interest Rates on Your Payday Advance Loan?

If your payday is in a week or so, but your rent is due in a couple of days with all your monetary resources gone to fill other gaps, taking a payday advance loan is one handy solution. The lender of your choice advances you the cash you need. Payday thus becomes payback day when you return the money you borrowed with interest. You should be able to afford interests and other incidental fees; otherwise a payday loan is not the best option for your situation.

How to Estimate Interest Rates for a Payday Advance Loan?
Most payday lenders will disclose the fee applied per $100 and this might seem fairly affordable for the time of the loan. To be able to see the true size of the interest, you should convert that to the APR (Annual Percentage Rate). Here is an example of how to calculate the APR. Say you borrow a payday advance loan of $600 for a period of 14 days. The lender applies a cost of $25 per hundred dollars.

1. Divide the loan amount by hundred. In your case that will be 600 : 100 = 6
2. Multiply your result by the cost per hundred to find the total loan charge. For you that will be: 6 x 25 = 150
3. Divide the total loan charge by the amount of the money borrowed. 150 : 600 = 0.25
4. Multiply the answer by the number of days in a year (365): 0.25 x 365 = 91.25
5. Divide the answer by the term of the loan (14 days): 91.25 : 14 = 6.517857
6. Find the annual percentage by moving the decimal point two places to the right: 651.79%

So, with this not so complicated calculation you can see clearly that the APR for a payday advance loan of $600 with a fee of $25 per hundred dollars is 651.79%! A rather high percentage, that one is! Nevertheless this calculation is not meant to scare you off, it is instead meant to help you act in full knowledge of all circumstances and consequences.

When is a Payday Loan Beneficial?
If you are capable of respecting three basic rules of payday loans, you will not worsen your financial situation, but benefit from their help.
1. Find out all fees and interest rates, calculate the APR. Get familiar with all terms and conditions prior to submitting your application.
2. Only borrow the minimum amount needed to get you out of trouble.
3. Never delay repayment. Know the exact payment due date and keep it rigorously.

With all the high costs involved, payday loans have an increasing popularity. That reflects the high demand for these short-term loans due to the uncertainty of the present economic atmosphere. Yes, the APR looks scary and can be intimidating, but if no other solution presents itself when needed, you should go for the payday advance loan. Pay your rent and forget about stress and worry.