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Monday, July 14, 2014

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When you are in a financial emergency and you have no other options, you can resort to cash loans. They are readily available from local and online lenders. They are easy to obtain as they do not involve a thorough credit check. They are quick to get too. You obtain the money instantly upon approval. But how much do they actually cost? Let's find out.

Cost Basics

The total cost consists of the principal, interest and fees. With cash loans, you can typically choose any loan amount from $100 to $1000. You should try to borrow as little as possible. Most lenders allow you to specify the sup to $50 such as $250 so you should not miss to take advantage of this opportunity.

Lenders are required by law to present the interest rate which they charge. It is typically in the form of Annual Percentage Rate (APR). As these products have a short term, typically one month, they have very high APR. You have to check precisely the interest amount which you will have to pay. You can expect anything between 400% and 1000% in most cases. Since the interest rate is charged per day, you would want to divide this percentage by 365. If the APR is 450%, the interest rate charged daily will be approximately 1.233%.

Most cash loans have an initiation fee. It is typically between 5% and 15% of the principal amount. For principals above a certain threshold additional fee on the amount above this threshold can be charged. For instance, if you take out $1100, you may have to pay an extra fee on the final $100 which you borrow.

There is usually a monthly service fee as well. It is typically a fixed amount such as $5 or $10. When you borrow the money for a shorter period than a month, the whole fee may be charged or a portion of it may be charged depending on the number of days which you have to repay the loan.

Cost Calculation

Let's say that you want to borrow $100 for 30 days. In this case, your interest charge with APR of 450% will be $37. If the initiation fee is 10% of the loan amount, you will owe another $10 to the lender. Let's assume that the monthly service fee is $5. As a result, the total cost of the loan will be $52 and you will have to repay $152.

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