Hidden Fees with Payday Loans
Origination Fees
Explanation
Payday lenders typically charge an origination fee for processing the loan, which can range from $10 to $30 for small loans or up to 10-20% of the loan amount for larger loans.
Probability to Save
LowWhy and How
Payday loans generally have fixed fees, making them difficult to negotiate. However, comparing lenders is essential to find lower origination fees. Consider alternative credit options like credit union loans, which often have lower fees.
Interest Rates (APR)
Explanation
The annual percentage rate (APR) for payday loans can range from 200% to 400%, depending on the loan amount and the state’s regulations.
Probability to Save
LowWhy and How
Interest rates are typically set by the lender and vary by state. Shop around for different payday lenders to find lower rates, or explore alternatives like credit cards or bank loans with better terms.
Roll-over Fees (Loan Extensions)
Explanation
If you're unable to repay the payday loan on time, the lender may charge a rollover fee, typically $10 to $30 or more, adding interest to the total loan amount.
Probability to Save
MediumWhy and How
Avoid rollovers by repaying the loan on time. If necessary, negotiate for lower rollover fees or request an extension without extra charges.
Late Payment Fees
Explanation
If you miss the repayment deadline, payday lenders charge a late fee, which can range from $10 to $25 or more.
Probability to Save
HighWhy and How
Make payments on time or set up automatic payments. If charged, contact the lender to request a waiver or set up a payment plan.
NSF (Non-Sufficient Funds) Fees
Explanation
If your payment is returned due to insufficient funds, payday lenders may charge an NSF fee of $25 to $40 or more.
Probability to Save
HighWhy and How
Ensure sufficient funds in your account before the payment date. If charged, request a waiver for first-time occurrences or negotiate a payment extension.
Credit Insurance Fees
Explanation
Some payday lenders offer optional credit insurance, costing $5 to $15 per $100 borrowed, to cover loan payments in case of death, illness, or job loss.
Probability to Save
HighWhy and How
Credit insurance is optional and can usually be declined. Opt-out during the loan agreement process to avoid this cost.
Prepayment Penalties
Explanation
Some payday lenders may charge a fee, typically $10 to $30, for paying off the loan early.
Probability to Save
MediumWhy and How
Ask about prepayment penalties before signing the loan agreement. If already under contract, negotiate with the lender to waive the penalty.
Collection Fees
Explanation
If you fail to repay the loan and it goes into default, collection agencies may add fees up to 25% of the loan amount.
Probability to Save
LowWhy and How
Repay the loan on time or negotiate with the lender before defaulting. If in collections, negotiate with the agency for reduced fees or a lower settlement.
State-Specific Fees
Explanation
Some states allow payday lenders to charge additional fees such as processing or registration fees, ranging from $5 to $20.
Probability to Save
MediumWhy and How
Research your state’s payday loan laws and choose lenders with fewer state-specific fees. Consider alternative credit sources with lower costs.
Fee for Failure to Provide a Post-Dated Check
Explanation
Some payday lenders may require a post-dated check or ACH authorization. Failing to provide this may incur a fee of $10 to $25.
Probability to Save
MediumWhy and How
If uncomfortable with post-dated checks, opt for lenders that don’t require them. Dispute the fee if it wasn’t clearly communicated upfront.