What is the Average Interest Rate on a Payday Loan?
Payday loans are unsecured loans that help individuals facing financial difficulties to pay for their important expenses. The loans are usually of a short term duration that must typically be repaid within a few week of obtaining the loan. Individuals either write an advance check of the loan amount or authorize access to their checking account so that the required loan amount automatically gets transferred to the lender.
Average Interest Rate on a Payday Loan
Lenders quote finance charges or fees instead of interest rates on the payday loan. This fees in turn determine the interest rates, or more specifically the annual percentage rate (APR), on the loan. You can use online calculator to determine the annual interest rate that relates to a specific payday loan. This will help you in making comparisons between the loans offered by different payday loan lenders.
An important point to remember regarding payday loans is that the interest rate not only differs from lender to lender but also the rates vary in different states. A number of states have put a limit on the maximum fees that the lenders can charge to the individuals.
According to a study published in USA Today in 2014 the highest average APR charged in the US was in Idaho, South Dakota, and Wisconsin where the lenders charged an APR of 582%, 521%, and 521%, respectively. That was followed by Delaware (517%) and Utah (474%).
The lowest average APR was charged in the states of Colorado, Oregon, and Maine where lenders charged the rates of 129%, 156%, and 217%, respectively. The higher the APR rate, obviously more will be the total amount that the individual will have to repay to the lender.
Disclaimer Notice: The article/blog is intended for informational purposes only. You should not make any financial decision based on the information provided in this article, and without consulting with a financial expert.