When we look through payday loan offers we are terrified by extremely high interest rates. But we will use payday loans for a short period of time, not a year, so these APRs are not real. So why do lenders display the APR if it is not relevant to the actual cost? Well, for starters, APR is still relevant, helps you calculate the real cost and should not be ignored because it shows how expensive different loan offers actually are.
As to why it is showed, it is showed because it is a legal requirement in the most states for any person or company lending money. They need to say in advance what APR they charge on their loans. Full disclosure is necessary to protect the company and the borrower. They lend money for a day, month or year they have to show the annual interest rate. APR is useful when you want to compare quotes from several lenders, because it includes all costs associated with the loan.
Save with overnight payday loans and without credit cards
We all know that it is important to repay payday loans as soon as possible. Of course, it would be amazing if all loans with low interest rates would have no duration limits, while loans with high APR would have a maximum repayment term of 31 days. But “reality is what it is, not what you want it to be.” And you should be a smart borrower and always calculate how much a loan will cost you.
The truth about cash loans and “high” interest rates
The problem with capping interest rates on loans is that while it may seem the most obvious solution, it will be borrowers who are suffering. The reason why these loans are so expensive is because they are designed for customers who have a higher risk of defaulting. Due to the amount of people defaulting to repay payday advances and not being able to make payments on time, payday lenders have to set their interest rates to a figure that allows them to cover their costs safely otherwise their business could be in danger.
So, overnight cash loans are perfect for solving emergencies, but as with any other financial operations, there are still some important formalities for smooth application process. The main requirements should be met before being approved for money. First, a borrower who requests a loan must be of legal age to enter into a business relationship (18 years old). The next requirement is that the borrower must have a citizenship and a regular source of income in addition to a valid bank account.