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.
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.