Payday Loans: How they rate against alternatives
By APSunday, February 21, 2010
Payday Loans: How they rate against alternatives
The average fee for a $100 payday loan is $15.
If you translate that two-week advance into an annualized rate, as on a credit card, you’re looking at a 391 percent interest rate.
By that measure, the payday lending industry says its rates are cheaper than the alternatives available to risky borrowers. Here’s a look at some options borrowers in a pinch might use, and how they stack up against payday loans.
The calculations assume the fees are for $100 in credit or charges for two weeks.
Fee — Loan Type — Annual Percentage Rate
$15 — Payday loan — 391 percent
$29 — Overdraft fee on checking account — 755 percent
$37 — Credit card late fee — 965 percent
$56 — Bounced check fee — 1,449 percent
Source: Community Financial Services Association of America, the payday lending industry group
