We all know that  fast cash loan of any type is expensive, but how much does it really cost?  In this post I want to help you understand what you’re actually going to pay on these types of loan, as well as a bit of info why you’re paying so ridiculously much!

I want to break this down by payday loans and title loans, so feel free to skip to whatever section pertains to the loan that you are interested in applying for.

Also keep in mind that interest rates change on a daily basis, and these are just averages and estimations.  Talk with your lender or payday loan store before applying to get exact numbers.

Payday Loan Rates

Each state has their own regulations on what payday loan lenders can charge, but the average is around $25 for each $100 that you borrow.  Broken down into an APR percentage, this number is extreme, but since the loan is repaid in less than a month an annual percentage rate is an unfair way to demonstrate their cost.  If a payday loan company was to charge a rate closer to what a regular bank would, they would only make a few bucks in interest on each loan.  That might sound great for you, but payday lenders wouldn’t stay in business for very long!

Another reason these loans cost so much is the risk that the lender takes on by giving you money.  There isn’t a credit check involved, so they have no idea of what your financial history is like to be able to determine the likelihood that you’ll pay the loan back.  This leads to a lot of loans going unpaid and to collections, which costs the lender even more.

So to break down what to expect to pay on your loan, we’ll offer this simple payday loan calculator:

As you can see, these loans get extremely expensive quick!  Also, this is for the initial loan amount, not factoring any extensions or refinancing.

Title Loans

Stat regulations on auto title loans are even more bizarre than they are with payday loans.  They vary wildly from state to state, so it’s hard to pinpoint a single number that you can expect to pay.

What does seems to be the norm, however, is 25% monthly interest.  That’s not 25% APR, but a monthly interest charge that adds up to an insane APR percentage.  Since title loans are normally repaid over the course of several months, you are going to pay a lot in interest.

One thing that I have to add, should you apply for a title loan, is that you should not accept the option to pay “interest only” for any period of time.  This is where title loan lenders prey on the uninformed.  They make it sound like a good idea, but all you’re going to do is pay the interest on your loan, and nothing towards the principle.  After months of paying interest, you will still be left to pay back the original loan amount.

To read some horror stories about title loans from CNN, click here.

My intention is not to turn you away from getting a loan like this, I just want you to know what you’re getting yourself into.  Knowing what to expect when you apply for something like this can go a long way to helping you make smart decisions when faced with the lender’s questions.

Thanks for reading!

-Lydia