Are Some Payday Loan Rates Much Different Than Credit Card Rates?

Are Some Payday Loan Rates Much Different Than Credit Card Rates?

by

Holly Petherbridge

The interest on payday loans online is a big negative for many. High interest rates are notoriously attached to the short-term loans causing increased financial problems when not paid on time. The interest rate is stated on the contract and the borrower has opportunity to ask questions for better understanding of what it could possibly do to the amount owed. High interest will charge your account each extended term making it more difficult to pay off your payday loans on time. It will also cancel the low cost of this loan if it was paid off on time. For the most part, an online payday loan remains low cost in comparison to late fees or overdrafts when paid on time.

Credit card interest has been creeping higher during these tough financial times. The average credit card rate is around 17% with many charging more than 20%. Start-up credit accounts or special offers bring the average down. Payday loan online rates vary from company to company. One of the biggest differences between the two types of third party money is that a direct payday loan will stick to the interest rate on the contract. Credit card companies will change the interest rate for different reasons. They will not warn you of the rate change and many will not even notice unless the fine print is read. Interest rates will eat away at your monthly budget no matter who the lender is.

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If you carry a credit card balance of $2000 and the interest rate is set at 20%, your monthly charge on your total will be about $33. The minimum payment for the month may only be $40 which means that you will only be paying down your balance by about $7 each month. The only way you can make an impact on your debt is to pay extra each month. Times are tough and many folks are living paycheck to paycheck so coming up with extra is tough. Long-term debt, even with lower interest rates can and will affect your budget.

There are some payday loan online lenders who charge less than 20% for their loan fees. There are most others who charge more, but nowadays, it is not unheard of for a credit card company to charge interest rates above 20%. The credit card also gives easy access to spend any remaining balance no matter how hard it was to pay it down. Once you pay down your online payday loan you will not have any temptation to re-spend the money since the money is a one-time offer. In order to advance with debt payoff, you will need to refrain from creating any new debt. As tempting as it can be to spend the available balance, it will prove to be fatal to all your hard work budgeting payments. Credit card traps are easy to fall into.

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