1. They are extremely expensive
If you don’t have good credit, you will unfortunately have to pay more for any loan than someone with better credit, unfortunately. If you compare loans without a credit check with regular loans for bad credit, however, it is a difference between whether you want a high rate or an exorbitant rate.
A lot bad credit loans charge about 30% APR. With payday loans, for example, you will often be charged around 400% APR, or more than 10 times that. These numbers may seem abstract, so it’s helpful to see what that actually means for your wallet at the end of the day. Here’s what three different $ 500 loans will cost if you pay them off over a six-month period:
The difference between having good credit and relying on payday loans in that case that’s $ 706.25 more in interest, more than what you even borrowed in the first place. It’s high costs like these that a lot of people see as criminal which is why some states ban payday loans.
Since payday loans only last until your next payday, the term length is usually around two weeks, not six months. However, there are cases where you can end up paying that high APR for even longer (even six months or more like in the example above), which brings us to our next point.