Instant Cash Loans: The Interest Rate Myth | PaydayLoanSolutions.Net

If you Google ‘instant cash loans’ or ‘payday loans’ online, you will find millions of hits. Some of them will extol the virtues of online cash loans and enable you to see past the shortsighted criticism of this form of lending. However, the most popular results you see will probably be ‘450% APR’ and ‘predatory lending’. This is significant because it’s the average APR rate charged by American online cash loans companies. As a result, APR is constantly used as a stick to beat instant cash loans with. And despite the fact that the full story is not being told, the uninformed consumer accepts this as fact and continues being ripped off by banks.

Regardless of the ‘financial expert’ you speak to, their complaint relating to instant cash loans is always the same. They complain about APR and nothing else. They ignore the fact that this is a consequence of short-term lending and paint an ugly picture of online cash companies. Rest assured, these ‘experts’ are affiliated with a bank in one way or another. Their reason for speaking out has nothing to do with protecting the public and everything to do with lining their pockets and those of their masters.

The Truth

Their protestations have not fallen on deaf ears. Although many American states are finally seeing the light, there are others who refuse to change their mind about instant cash loans. They use the old APR excuse to ban this form of lending. Oddly enough, these states don’t ban high overdraft fees charged by banks if you are misfortunate enough to see your bank account drained. It doesn’t matter if you are overdrawn accidentally, you will still be hammered with fees. Did you know that a Study of Bank Overdraft Programs conducted by the FDIC in 2008 showed that when it came to short-term borrowing, online cash loans were cheaper than a bank overdraft?

Some Evidence

Let’s compare what you would repay on an instant cash loan and a regular bank loan. Taking the average 450% representative APR offered by American online cash loan companies, a $400 loan paid off over 10 days will cost you approximately $49.31 in interest. This means that you are effectively paying just under 12.5% interest on the loan over the 10 day period. The average bank loan interest rate is creeping up and a 13% rate is not unusual. Now take a $10,000 loan from a bank over 10 years with a 13% interest rate and you will be required to pay almost $18,000! Essentially, you are paying 80% extra on top of your original loan.

Immediately, advocates of banks will moan that this is not representative of what is being repaid due to the difference in repayment times. However, it’s hard to see the difference between this and the original APR argument of those who oppose instant cash loans. When you apply for a cash loan online, remember that it’s a short-term solution and you’ll receive better value for money than you would from a bank. As you can plainly see, using APR to dismiss instant cash loans is an inherently flawed method of attack.