Question: Which payment method typically charges the highest interest rates?
Ans: Payday loans.
Explanation: Payday loans are the payment method that typically charges the highest interest rates as compared to other payment methods. There is no doubt that every payment method has its own interest rates, but it has a quick solution to a sudden decrease in income.
Thus, after considering the interest rates of cashier checks, pre-paid cards, and credit cards; we came to the conclusion that payday loans high the highest interest rates. These loans are calculated by adding 15-20% to every $100, which is borrowed.
What Are Payday Loans?
A payday loan is also known as a cash advance loan, payroll loan, payday advance, salary loan, etc. This is actually a short-term loan unsecured loan that is often characterized by high-interest rates.
This loan is for those individuals who are willing to get some fash cash when they don’t have a good enough credit history or a bank loan. This loan is popular because you quickly get it as compared to other loans. And this is the reason why this payment method typically charges the highest interest rates.
At the same time, if the customer is unable to pay on time, additional interest fees are charged on the same amount. This is the disadvantage of payday loans.
Benefits Of Choosing Payday Loans in 2021
You may have to give 15 to 20 dollars for every $100 you borrow from the payday lender. This is how interest amounts are calculated on payday loans. Now, let’s discuss the top benefits of payday loans in 2021 that you should know.
i). They’re easy to access
One of the best advantages of payday loans is that they’re very easy to access. Sometimes, you loan within 24 hours. Isn’t it amazing? Yes, it is! Besides, the loan application will take just five minutes to apply, thus, saving your time and effort to a great extent.
Whether you apply online or offline, the loans are much faster and convenient, unlike traditional loans. With this loan, you can get money faster.
ii). There are fewer requirements
Another best advantage of payday loans is that are very fewer requirements than other loans. Traditional lenders generally require a credit card check, proof of income, photo ID, social security number, and will verify your ability to repay a loan.
On the other hand, to apply for a payday loan, you need to have an active bank account, have a regular job or some constant source of income, have a government-issued ID and be at least 18 years of age.
iii). The loan process is convenient
No appointments are necessary when you apply for a payday loan. There is no additional personal research requires to get this loan and this is the reason why people prefer this loan type.
The best part is that it saves your precious time that you can invest in some other useful work. This is the reason why the payday loan is useful and also the answer to your question of which payment method typically carries the highest interest rates.
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With benefits, there are numerous drawbacks of payday loans that you need to consider before prioritizing this. So, let’s discuss its cons.
i). They’re expensive
There is no doubt that payday loans are expensive than other conventional loans. The average interest rates of payday loans are about 400. However, the interest rates of credit cards are 4 to 36%.
The interest rates also vary depending on your location where you currently live. And payday loans are sometimes tough to pay than traditional loans.
ii). They have access to your bank account
Another truth about payday loans is that they have access to your bank account. This is usually done to gain access to a fast cash advance.
After that when you don’t have money in your bank account and the payday lender has a check of your bank account, you may face bounced check fees.
iii). They target low income
According to our research, payday lenders are mostly situated in minority communities. There are about 1.8 payday loan stores per 100,000 individuals in African American communities.
Thus, this is the reason why payday lenders target low-income, minority communities. The people facing financial crises have no solution other than taking loans.
iv). It’s easy to get trapped in a debt cycle
Yes, in payday loans, it is very easy to get trapped in a debt cycle. Each time you extend your loan, a payday lender charges some additional fees on the same and this gets you a loan increase every time.
Experts suggest that take payday loans only when it is absolutely necessary, otherwise prefer other traditional loans where there are low-interest rates.
The Final Thoughts
Which payment method typically charges the highest interest rates? Payday loans is the most accurate answer to this question. The above-listed information describes the best for this data. Besides, if you have any query, do let me know in the comment section below!
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Nisha Jaiswal is a Traveler by passion and a Content Writer by profession. She is one of the Content Editors at FollowTheFashion, OnlineHealthMedia, ContentRally, etc. She loves to write articles on Fashion, Beauty, Health, Tech, and much more. She is also a freelance writer who writes SEO friendly content.