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2015 Payday Loan Rankings
* Costs vary by state. Cost shown are based on pricing for Delaware residents when available. Check each lender's website for updated information. Some lenders will not provide pricing data until an application is completed.
What Are Payday Loans
Payday loans are loans based on your pay check. The typical process is once approved for a loan the payday lender will deposit funds directly into your checking account. At your next pay date the lender will automatically deduct the principal and fees from your checking account. These fees range from around $9 to $30 per $100 borrowed. So if you get $300 deposited into your checking account, on your next payday $327 to $390 will be automatically deducted from your account depending on the fee for your particular loan. If the full deduction can be made then the loan is paid in full and you are done. If you are unable to make this full payment some payday lenders allow you to renew the loan. The extension usually is at the same rate and you will pay fees on the unpaid fees from the previous loan. This means at your next payday (now the second payday since you took the loan) $356 to $507 will be automatically deducted from your account. As you can see the fees add up fast and one can end up owing in fees way more than the original loan so please be careful with these loans. If you think you will be unable to pay the loan off in one or two pay periods, an installment loan may be a better option.
Why Are Payday Loans So Expensive
Payday loans are generally unsecured loans and not based on credit history. Traditionally, when lenders make loans they evaluate person's credit history and also take collateral. This helps lenders predict the likelihood of being repaid and in the event of not being repaid they can seize the collateral to cover the loan. Payday loans have neither security nor credit history. This makes them fairly risky loans for lenders so they charge more to cover the loans for people that do not pay back their loans. In addition, there is adverse selection. This means individuals who do have credit history and collateral are taking other types of loans so people applying for payday loans are already, on average, high risk. So one of the reasons payday loans are expensive is the nature of the loan. Another reason payday loans are expensive is the lack of consistent regulation, enforcement, and transparency. This is why pricing varies so much. The market is very inefficient. See Payday Loans Too Taboo To Touch for more information on improving the payday lending space. Finally, these types of loans can be very expensive because some lenders take advantage of the emergency nature of loan and charge very high rates. Regardless of why payday
loans are expensive users should approach them with caution.
Avoid a Vicious Debt Cycle
Payday loans are a very expensive form of borrowing. As described above, if one is unable to pay off the loan at the next payday, costs can quickly spiral out of control. This what is often referred to as a debt cycle. One starts off in a bind with a small amount of debt but within weeks the debt quickly escalates into an unimaginable amount. For this reason The Payday Hound believe payday loans should only be used for emergency situations. This means one should almost never take out a payday loan. Unless someone is just extremely unlucky payday loans should rarely be used more than 1 or 2 times a year. See Don't Use A Payday Loan for Summer Vacation Cash or Borrow Money Options to determine if there are other options to taking a payday loan.
How Payday Loans Work
If you do decide you need emergency cash and a payday loan is the only option for you, the application process can be quick, taking 5-15 minutes, and approval is often instant. To qualify one must be employed, have direct deposit, and be over 18 years old. Payday loans are not available to members of the military so you must be a civilian as well. If approved, the money is generally deposited into your checking account by the next business day. The deposited cash is a loan and is due in full your next pay period plus fees. These loans can sometimes be renewed, but additional fees are incurred. These costs add up quickly, as you end up paying fees on your fees. Renewing is generally not a good choice, so if you believe you are unable to pay your loan in full at your next pay period, consider an installment loan.
Installment Loans Versus Payday Loans
The difference between installment loans and payday loans is that installment loan payments are spread out over time. This reduces the amount of individual payments and APR for an installment loan but the total fees paid increases. See Payday Loans or Installment Loans for more information. Many consumers prefer installment loans because paying the entire loan at your next pay period, as payday loans require, is often too difficult or impossible and renewing payday loans becomes extremely expensive.
Payday Loan Lenders
Companies offering payday loans vary greatly from those matching services to direct lenders, and from state licensed lenders to fly-by-night lenders. There are numerous stories in the press of individuals being taken advantage of by unscrupulous payday lenders. The Payday Hound strongly prefers using established state licensed lenders. See Payday Lenders to learn more about lenders.
Find Loan Lenders by State
Payday loans are state regulated so not all lenders make loans in all states. To find the best rates that are available in your state select your state below.
Category: Payday loans