With today’s inflation rate, it’s not unusual for someone to be a bit cash-strapped. Things are especially hard if you have an emergency like an accident or have to do car repairs. Of course, you can always contact a loved one or an acquaintance for a loan, but it can be a bit embarrassing.
Payday loan services are a lifesaver in such scenarios. These loans can help you last till your next payday. The cool thing is that you usually don’t even need an excellent credit score to qualify for a payday loan. The only negative is that the mortgage rates can be a bit steep. However, before getting into that, let’s go over payday loans.
What Are Payday Loans?
Payday loans are generally short-term loans you can take out against your salary. These are usually small amounts ranging from $100 to $1000, which is ideal because they are only supposed to cover emergency expenses until your paycheck arrives.
Generally, you can write an advance check to be cashed in on your payday and give it to the lender. Alternatively, you can give the lenders access to your accounts so that they can make an automatic withdrawal. The loans typically have a two-week due date and are repaid at once.
If you need more time, you can roll over your loan. Some lenders offer longer terms for their loans. However, they can cost you more as the interest will increase as the loan repayment term increases.
Mortgage Rates on Payday Loans
The average interest for payday loans ranges from 15% to 25% per $100. That’s $15 and $25 on every $100, respectively. The rate may seem high initially, but you must understand that you only pay this amount once. As long as you pay your loan on time, the rate shouldn’t be a problem. Sometimes the annual mortgage rates can range from 391% to 521%. You will need to refer to your state’s laws to see if there is an interest cap on these loans.
Annual Percentage Rates
The annual percentage rate (APR) refers to the annual mortgage rate on your borrowed amount. It isn’t all that relevant to payday loans since the repayment period is only two weeks. However, top mortgage lenders and other long-term lenders use APR to show the mortgage rate. It helps you put the overall mortgage rate in perspective.
Usually, these rates vary from 391% to 521%. You can calculate the rate by dividing the total amount of the interest by the borrowed amount. Afterward, you multiply the answer by 365 (365 days in a year), divide the answer by your loan term, and finally multiply the answer by 100.
The calculation will go something like this for a $500 loan with 25% interest per $100. The total interest will be $125. You’ll divide this 125 by 500 and get 0.25. After multiplying 0.25 with 365 and dividing the answer by 14(loan term), you’ll get 6.51. Multiplying this number by 100 means a total APR of 651%.
Factors Affecting Mortgage Rate on Payday Loans
Of course, the mortgage rates can vary from lender to lender. Your situation can also affect the mortgage rates. For example, the mortgage rate will be high if you borrow more money. It also depends on your repayment plans. The rate will be higher for the shorter term. However, the cumulative mortgage amount can be higher if you take out longer loans. Other factors like your income also affect the overall mortgage rates.
Your state’s laws can also make a huge difference. Some states have an interest cap. That means lenders can’t charge you more than 36% APR. However, this only works for some states like Colorado, New Jersey, New York, etc. Most states don’t have any mortgage rate restrictions.
Requirements for Getting a Payday Loan
Payday loans don’t take your credit history much weightage. However, they still have criteria you must fulfill to qualify for a loan. These are:
- US citizenship
- Social Security number
- Valid checking account
- Valid phone number
- Address of your present residence
Most payday lenders set a minimum amount for your income. This amount can range from $800 to $1000 per month, excluding taxes. That’s because they will deduct the loan amount from your incoming salary. They may require you to submit a pay stub as proof.
They’ll also take your expenses into account. They may ask you about your bills or any outstanding debt. That’s because they need to establish that you can pay the amount back. Most of the time, they only approve your required amount if it fits into your income.
Depending on the lender, you may be able to apply for a loan based on social benefits or other forms of income. Some payday lenders won’t lend you money if you are military personnel or related to one.
What if I Can’t Make the Payment on Time?
Most payday loans have a two-week term, so you must make a payment on your payday. However, you can ask for an extension if you can’t repay your loan. Most lenders call this extension a “roll over.” If the lender agrees, you’ll only have to pay whatever loan fee you agreed on.
We don’t recommend getting an extension on your payday loan. That’s because it can hurt your credit score. Additionally, the high mortgage rate means you will owe the lender much more than the original amount.
Let’s say you borrow $500 from the lender. With a 25% interest on every $100, you owe $125 in interest. Delaying the payment for two more weeks means you’ll pay an additional $125. So the total amount will go up to $750.
The usual interest for $100 ranges from $15 to $25. However, depending on your circumstances, the lender may offer you different rates. Remember, the APR may seem scary initially, but they’re not that big a problem as long you pay the loan back on time.
Review the loan terms carefully and check your state’s laws regarding payday loans before taking out any loans. You’re in luck if you’re looking for payday loans in Mississippi. Loan ServiceMS can help you secure a loan online and quickly. If you live elsewhere, you should look into multiple options before choosing the lenders that offer the best terms.