Personal Finance from an amateur

Please note that I am NOT a financial professional, and have made plenty of poor decisions on my own finances.

Just about everyone knows that payday loans are a bad deal. Typically, they offer high interest rates and its easy to get stuck with loan after loan.

Unfortunately there are options which are even worse.

I know someone (NOT one of my own bad decisions) who got involved with installment loans.

Installment loans don’t require any collateral, so interest rates are much higher.  I looked at a few of their websites and found examples of rates as much as over 600% annually. I’m sure that rates could be even higher.

For example, https://www.axisadvance.com/rates-fees/ shows a bi-weekly payment of 76.37 over a year on a $300 loan. You’re paying back $1983.

Another company:

A loan referral company (they don’t make the loans but help you find one):

BORROW $200 FOR 14 DAYS WITH A $30 TO $60 LENDER FEE. YOUR ESTIMATED APR IS 391% TO 782%*

Payday loans are relatively expensive when compared with other loan products. Payday loans are not recommended as a long term financial solution and they should only be taken for emergency financial needs.

*Calculation: (lender fee / loan amount) x (amount of days in a year / duration of the loan) x 100
Low End of Range: ($30 / $200) * (365 days / 14 days) x 100 = 391.07%
High End of Range: ($60 / $200) * (365 days / 14 days) x 100 = 782.14%

The ’best’ option I found was ”only” a payment of $126 every 2 weeks for 13 weeks on a $600 loan. ”Only” $1638 repaid on that $600 over about 6 months.

I understand that without collateral the risk is much higher. I don’t think such loans should be illegal. I’m sure that the left would scream bloody murder if lenders stopped offering loans to high risk individuals at the 15% rate proposed by Sanders and AOC.

But please, do yourself a favor and stay away from installment loans.

 

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This entry was posted in Finances, Installment Loans, Misc., Money, Payday Loans, Uncategorized and tagged , . Bookmark the permalink.

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