Payday Loan Fees
If you're wondering what payday loan fees are and why people complain about them, you're not alone. Payday loans have been popular for decades now, and recently have begun to remold their image. Where they once were a strange or seedy way of getting cash, they're now a perfectly fine option to resort to, and many people have taken out this type of loan once or more.
A payday loan is a nontraditional loan for many reasons. First of all, the amount of a payday loan is smaller than most loans, being just a few hundred dollars on average. (It can be as low as $100 or as high as $1,000, but not multiple thousands of dollars, like traditional loans.) It's easier to obtain than a traditional loan, as many lenders offer what is known as a “telecheck free loan” or a “faxless loan” -- essentially a way to loan to people with bad credit.
The loan term of a payday loan is shorter than most traditional loan terms, being just a few weeks long on average. The shortest loan may be as little as a week, while the longest is no more than two months. It's possible to “rollover” some loans for longer, but this is not recommended.
This already helps to explain why lenders must charge payday loan fees to their consumers. Like interest on a traditional loan, they need to make money on the money they lend out, and it's much riskier in some cases than most loans. Because they loan to people with bad credit, they often lose part of, or even all of, the amount of some of their loans. This means the fees for other consumers must be higher, to cover the risk.
Payday loan fees don't have to be exorbitant, however. If you're facing fees you think are unreasonable at your local payday loan shop, try looking elsewhere, particularly online. Online lending allows lenders to minimize the cost of doing business, so they can charge less money. You can really minimize the amounts of payday loan fees you have to pay by doing so.
There are also other ways to minimize the payday loan fees you pay. By carefully reading the terms and conditions of each contract for a loan you are offered, you can select the lender who is offering you the best deal, which may not be apparent upfront. Always note the date on which the loan must be repaid and be sure it is repaid promptly, or you will incur payday loan fees for being overdue.
Payday loan fees are essential to the payday loans industry, and allow lenders to continue to help you out of a crisis whenever you need them.