Repay Early
Payday loans are short-term, high interest loans.
If you use them as long-term loans, the interest will soon exceed the principle of the loan.
If you repay early, though, you could save money…
Let’s assume:
- you borrow $400 from a payday lender
- the lender’s fee is $30 per $100
- the term of the loan is 14 days
If you ‘roll over’ or extend the loan (by paying only the interest):
- on week 2, it will cost you $120
- on week 4, another $120 ($240 total)
- on week 6, yet another $120 ($360 total)
Every 14 days, you increase the payday lenders profit by $120 at your expense.
If you wait two months to repay the loan, it would have cost you $480 in interest and the principle would still be outstanding.
At week 8, the interest will exceed the principle of the loan. It would be costing you $480 to borrow $400 dollars!
If, on the other hand, you can repay your loan early, some payday lenders may decrease the fee. Be sure to read the contract carefully.
If your payday lender offers a discount for early payment and you find an alternative with a lower interest rate, repay the payday loan immediately. It is the most expensive form of legal credit.
Repay quickly. If you use payday loans as they were meant to be used, you will still be paying a lot of money. If you abuse cash advance loans and use them as long-term loans, you may end up on the debt treadmill.
Recent Posts:
- 05/05/2009: CompareCashLoans.com Gets a Facelift
- 06/16/2008: Demographic Study of Online Payday Loan Consumers
- 05/26/2008: Daniel O’Sullivan
- 04/24/2008: Update: Payday Loan Laws that Hurt Consumers
- 04/07/2008: Manitoba Public Utilities Board
Random Posts:
- 08/07/2006: Pitfalls When You Stop Payment on a Payday Loan Check
- 10/07/2006: Michael Rinoldo
- 02/13/2007: Peggy Matson
- 08/09/2006: Kenneth Compton
- 07/08/2006: Professor Tom Lehman