When expenses unexpectedly arise, and you don’t have savings to meet, taking out a payday loan might seem appealing. In the United States, this mechanism offers fast cash, and they are very easy to get for people who have a job.
However, moneytree payday loans are a more expensive way to borrow money. For example; If you take out a loan like this to buy a new car battery and fail to repay it on time, you could end up paying more in fees and interest than you did for the same battery.
Payday loans are short-term loans that range from 13 days to 120 days. Loans over 120 days are not payday loans.
The reason they are called payday loans is that the loan amount depends on how much the borrower expects to get on their next payday. These loans carry extremely high-interest rates, averaging around 400 per cent. That’s 15 times higher than the interest rates charged by credit card companies.
In general, a payday loan cannot be more than 25% of your gross monthly income, or $1,000, whichever is less. So if you make $2,000 a month, the most you could borrow from a payday lender is $500. Under Illinois law, you have the right to enter into an interest-free repayment plan with your lender after you’ve been in debt for more than 35 days. This option applies only to payday loans, not payday instalment loans, and you must apply.
Moneytree payday loans target people who are desperate, especially the working poor and elderly, on social security. They look for people who need money so much that it’s hard to say no to unfair loan terms. You can pay off a payday loan and pay no interest charges if you pay it off in full. This must be done no later than the end of the second business day after the day you signed the loan.
Request a payment plan from your payday lender
All payday loans come with a payment plan. This allows you to stop interest from building after 35 days. If you haven’t repaid a payday loan after 35 days, you can ask the payday lender for a payment plan.
Pay in instalments
The payment plan gives you 55 days to repay the loan in instalments with no additional fees. If you and the payday lender agree, the payment plan can be extended to 90 days. Illinois law prohibits lenders from issuing a new payday loan if it results in debt for more than 45 days in a row.
High cost for immediate money
Payday loans are small, short-term loans that are easily obtained because the lender rarely checks the borrower’s credit.
Fees charged by these lenders are high, typically $15 for every $100 borrowed. When the agreed date arrives, the lender can be allowed to collect the loan, or the debt can be extended, delaying the payment in exchange for more charges.
Here’s the problem: the high fees charged by lenders drive up the effective interest rate to an exorbitant level. A $15 fee to borrow $100 may seem like a 15% interest rate. In reality, due to the short term of the loan, it is the equivalent of an annual rate of 390% – more than 10 times the typical rate for a credit card cash advance, which is an extremely expensive option.