12 Month Payday Loans - Payday Loans Are They Worth It
12 month payday loans are taken to meet a sudden and unexpected expense, such as an urgent car repair for somebody that relies on their car for their work, or a serious family illness or crisis that calls for unplanned long distance travel. You do not immediately have the finances to cover the costs, and don't have the time to wait until payday. What do you do? The answer could be an online payday loans, and while the APR (annual percentage rate) for such loans is high, you only have it for less than a month after which it is paid in full in a single payment. Because it is a special type of loan, there are specialist companies that offer them, and also many cowboys that will take advantage of your need if you are not careful. So what are the pitfalls of such loans? Not many if you keep to the agreement, although it is that which could be your downfall.
If you fail to repay the 12 month payday loans then the penalties can be severe. To understand them you have to understand the initial charges. The fee for such a loan could be as much as 100 on a 400 loan, which means that if you pay it in a month, the APR is 300%. That might sound a lot, but if you are desperate for money, and can easily pay back the 125 on payday, then to you it would be a good deal. You get out of a hole and the lender makes a profit - just what lending and borrowing is all about. If 400 doesn't seem much, it is not far off the maximum that most payday loan companies offer, and that sum is not always limited by the lending company. Most states have a maximum lending amount for small loans, such as Alabama where it is $500, and also a maximum fee for the loan, such as the 15.5% of the same state. The fee is hardly an interest rate due to the short term of the loan, and some states such as Utah have limits neither on the amount of the loan nor what can be charged for it. D.C. lenders charge 5% on amounts up to 250, although there are some lenders that charge no fee for first-time loans of up to 1000. What if you fail to pay at the allocated time?
An 12 month payday loan is not like a normal loan, with set monthly payments to be made over a number of years. With these loans you make one single payment at the agreed date and pay off the complete loan. It is not, then, a simple matter of making a double payment next month plus a bit extra for charges, since the loans are not calculated on normal interest rates. What actually happens is more severe than just a simple charge. If you borrowed 1000 then a charge of 50 for a late payment would not seem much in relation to the original sum borrowed: only 0.5% of the total amount borrowed, and although you wouldn't like it you might not shout too loud.