Are There Low Cost Payday Loans?

Are There Low Cost Payday Loans?Many would-be borrowers stop to wonder if there are any low cost payday loans out there. Is it worth the quest, or should you simply accept that there’s no way around paying the high fees typically associated with payday lending.

The short answer is that no matter how you cut it, all payday loans are pretty expensive compared to conventional loans from a bank. But that’s not really an apples to apples comparison, so we’ll assume that when you’re referring to low cost, you’re comparing one payday loan against another payday loan.

When you start to make that comparison, there are some differences that can be seen, but mostly they are the differences between the states, and the difference between a payday loan and an online loan. Very rarely will you see two payday lenders in the same state that are offering different rates from each other. It may be that a lender will choose to offer a discounted rate on your first loan as a gesture of good will, but their standard rates will most likely be set at state limits.

What Would Be Considered Low Cost Payday Loans?

You might be able to find a loan online that look like low cost payday loans, but aren’t technically a payday loan. They may even offer what appear to be lower rates than a payday loan. Some lenders are also doing their best to make it so payday loans aren’t so bad, and they are linking their fees to how long you keep the loan, rather than automatically making it due on your next payday. For example, if you only keep the loan for three days you’ll pay far less than you would if you kept it for two weeks.

Payday Loan Alternatives
If you are concerned about the high cost of payday loans you may want to entertain other options. For example, you may be able to pawn or sell items around your home that you don’t want anymore. This could generate enough cash to get you out of a jam and avoid payday loan fees entirely. If you have a qualifying vehicle you may be able to get a title loan at some lenders, which will have installment plans and typically lower fees. Thinking creatively will usually help you save some money in the long run.

High Risk, High Fees
Payday lenders like to justify their high rates because they say they are in the business of high risk lending. What’s interesting is that most payday lenders have a low rate of default, so this claim is not very valid. What they really mean is that no one else will typically lend money to the borrowers that end up at a payday lender, so they are the last resort, and as such can charge higher rates because the customers have no where else to go.

Sizing Up Your Payday Loan Needs
The best way to avoid the fees is to avoid payday loans altogether. If you can’t do that then it’s best to borrow just what you need. The way to go about that is to take out only enough to cover your immediately financial needs, and resist the urge to take out more than enough to cover the gap. The largest amount of fees come from the extra money borrowed, so if you only need $300 take out just that, rather than going for $600 or more and then having to reloan it since you can’t pay it off on your payday without going broke again.

Our Recommendation
There’s really no way around paying high fees to a payday lender or getting low cost payday loans. They’re all in the business of making as much money as possible, and they will set their rates as high as the state will allow. The real beef is with the state that you are in, because they are the ones setting what they feel is a reasonable rate. States that put laws out limiting the amount of interest a lender can charge usually end up putting many lenders out of business. They simply can’t exist if they don’t charge the high fees, so it should raise an eyebrow if you see a suspiciously low rate at a lender.

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