When considering some of the options out there in the financial world, one thing that you need to keep your eye on is cost. How much is this going to cost me up front and how much is it going to cost me over time? Payday loans are some of the most costly items out there for a number of reasons. For one, they come with interest rates that are excessively high and make them almost impossible to use on a regular basis. How high are these interest rates? That will vary from state to state and from lender to lender, but you can be sure that you are paying a ton more than you would with other sources.
High monthly interest
Some people look at their payday loans and they see that they are only paying $45 in interest on a $300 monthly loan. That is only 15%, they will say, which is not all that bad. What you have to realize is that interest rates are generally calculated yearly. If you are paying 15% monthly, then that equates to an APR loan that is well over 200%. In some cases, you can pay an APR as high as 300%. This makes no sense for you financially and it can really hurt you over the long haul.
Rolling over the interest
Another issue with the interest rates on payday loans is that many people think it is a good idea to just pay the interest and roll their loans over for another month. This is a terrible approach and it will leave you with nothing but lost money. The rates are so high that if you do have to use payday loans because there is no other option, you want to pay off the loan right away. Get free from those loans as quickly as you can.