Q:

What is the range of interest rates offered by payday lenders?

A:

Quick Answer

A payday loan with a 2-week repayment structure has an average interest rate between 391 and 521 percent, according to the Center for Responsible Lending. Payday loans often lead to further financial distress because after paying the interest on the 2-week loan there is no money to pay other obligations.

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Full Answer

Often, the loan repayment date is extended, although finance charges continue to accrue. For example, a $325 payday loan that is extended eight times requires the borrower to pay $468 in interest, and the total cost of borrowing the initial $325 skyrockets to $793. Borrowers with more than five loans per year generate 90 percent of the payday lending business revenue.

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