[(Payday Loan Lender’s Fee / Borrowed Amount) * 365 Days] / Term of payday loan If an individual will borrow $100 and he agreed to a loan cost of $15 for two weeks, payday loans Medina OH the computed APR will be as follows: [($15 / $100) * 365days] / 14 days = 391%
The APR of payday loans results in three figures because it is computed every two weeks. Remember that the two-week term is common among payday loan lenders. Those who are aiming to find ways for low-cost financing for their urgent cash needs will usually get shocked or confused upon seeing such APR figures.
As mentioned earlier, the usual option for borrowers is the 2-week term. This opens up the argument that there is no logic in expressing the cost of payday loans through APR numbers.
Financial experts are pointing out today that instead of APR, the cost of the payday loan should be stated in a simple way (interest by actual term). The principal amount of the payday loan, rate of interest, and the number of payment terms should all be multiplied to get the figure mentioned above.
If Mr. X will take out a loan of $100 charged at $15 for 1 term (2 weeks), the computation for simple interest should be:
The final result will be only 15% which is already very small if the aspect of personal loan capability will be put into consideration. This rate is so small that financial experts can make an easy argument that payday loans are among the most practical sources of financing for those who have immediate cash needs today.
However, if this will be charged at $36, the resulting APR will be at 5000% which is a far cry from what has been computed for payday loans above. Based on these data, one could generalize that a payday loan is a more practical way of acquiring money for urgent needs.
How a Borrower Gets Qualified for Payday Loans
One of the reasons why payday loans are so popular even if they are costly is that the qualification process can be passed with great ease.
Payday loan lenders who offer payday loans online can be tagged as “careless” because they readily approve applications from people with bad credit histories. In fact, even those with no credit scores can also qualify for such payday loans. These are more than proofs that these payday loan lenders have little regard for credit score or the credit history of an individual. It is common for them to skip the process of doing credit checking on those who are applying for payday loans.
An alternative way to get a fast cash payday loan is to overdraw one’s bank account
If you are aiming to apply for a payday loan, the basic requirements include proof of a source of income, bank book, or account, and is of legal age (18 and above).
The proof of having a source of income will assure the direct payday loan lender that the individual will have the means to repay the amount being borrowed. Income can be sourced out through gainful employment, benefits, or other means.
A bank account is needed because most payday lenders today operate online. This means that if the application for the loan will be approved, money can be immediately deposited on the borrower’s account. Online banking is beneficial for both the direct payday loan lender and the borrower. The risk of issuing and carrying cash around is eliminated. The process of depositing money will also be shorter. There are instances wherein transactions take only a couple of hours to be completed.