Payday Loans vs. Traditional Loans

Payday loans are different from other loans in two main ways: • First, the loans are very short-term loans, so short, in fact, that most financial institutions don't offer similar products. • Second, the fees—or interest—you pay on a payday loan is extremely high. A recent report revealed that payday lenders charge anywhere from 416% to 988% interest for a $100, 14-day loan and that the national average annual percentage rate (APR) charged is 474%. Surprisingly, despite this, the payday loan industry is growing by leaps and bounds across the country. The Community Financial Services Association of America, a trade group for payday lenders, estimates that as many as 25,000 new payday lender shops will open up in the U.S. over the next six to eight years.