What's the cost of a $200 payday loan, you ask? Well, it varies depending on your lender and loan terms. Let's look at some examples, so we can visualize the answer. 🧮
OK, let's assume you get a $200 payday loan with a 450% Annual Percentage Rate (APR), which is not uncommon for a payday loan.
Now, how much would it cost you? Well, if you repay it after the typical two-week period, your finance charges would come to about $34.52. So, at the end of your loan term, you would owe the lender a grand total of $234.52, excluding any potential additional fees. 💸🙁
Learn: How much would a $500 payday loan cost?
Here's a detailed breakdown behind these terms, if you are unfamiliar:
- Principal Loan Amount: $200 - This is the initial amount that you borrowed.
- Annual Interest Rate (APR): 450% 👀 - This is the annual cost of your loan, including fees and interest.
- Loan Period: 2 weeks - This is the typical term for a payday loan.
Of course, this simple example does not factor in the many fees (like origination, late payment, or rollover fees) payday lenders often charge. These extra fees can inflate the cost of your loan significantly.
Also, remember that the APR on payday loans is calculated annually — so, if you extend the term of your loan, you're in for a bigger hit.
To avoid these high costs, consider alternatives to payday loans if possible. They could be things like personal loans for bad credit, credit card cash advances, payday alternative loan, or borrowing from friends and family. These alternatives could save you from falling into a cycle of debt.
Learn: What is a payday alternative loan?
Be savvy when it comes to your finances. Understand the costs associated with payday loans and make an informed decision. Because, at the end of the day, your financial health matters! 💖💵