If you’re employed and need some cash to pay your expenses until your next paycheck, payday loans are a popular (though often expensive) option. You may wonder how the interest rate on a payday loan is calculated. Remember, payday loans are high interest lender, to begin with, and interest rates 2022 are set to remain high at least until the end of the year. For that reason, when choosing to take out a payday loan, it is essential to know your interest rate. You can usually find your interest rate on the payday loan provider’s website. Here are several more important factors to consider.
The interest rate for a payday loan is based on the amount borrowed and the time you have to repay it. This rate can vary from lender to lender, and some lenders may offer different rates for various states or regions. If you are in a state with a higher interest rate, then you will pay more than someone who resides in another state with a lower rate.
Lenders also consider the amount of time you will be borrowing for. Generally speaking, if you are borrowing for an extended period, you can expect to pay more in interest than if you were to borrow over a shorter period. This is because with a longer repayment period comes more significant risk to the lender, as there is a higher chance of defaulting on payments.
The annual percentage rate (APR) will also be considered when calculating your payday loan interest rate. Payday loans typically come with much higher APRs than traditional loans because of their short terms and the increased risk associated with them. Payday loan lenders may charge anywhere from 6% up to 800% APR. These factors are weighed against each other to establish what your particular interest rate will be.
When calculating the interest rates, lenders typically look at how much money they can make from their loan per month or year. A payday loan lender may also consider additional factors such as your credit score, income, employment status, and other financial obligations that indicate how likely you are to repay the debt. For example, if you are employed full-time. In that case, you have steady paychecks coming in monthly, and you have a strong credit rating. Your odds of getting an approved payday loan are much greater than if you are unemployed, have broken credit, and have no other steady income.
In addition to interest, you will also be responsible for paying fees on your payday loan. Additional fees are also factored into the total cost of the loan and are usually considered when establishing your interest rate. Your payday loan lender will typically charge a fee for each $100 borrowed. The charge varies from state to state, but most lenders usually range from $15 to $30 per $100 borrowed. This fee may also be included in the interest rate of your loan, depending on the lender.
You can use a payday loan interest calculator to determine your loan’s interest rate and fees. Your total interest payable is calculated using the following formula: (Principal + Fees) x Interest Rate x Term = Total Interest Payable. For example, if you borrowed $300 with an APR of 15% for two weeks, your total interest payable would be calculated as follows: $300 x 15% x 2 = $90.
Contact the financial professionals at Bell Finance in Oklahoma today for a personal loan approval process that lasts as little as 30 seconds with no credit check.
