What are the costs and fees for a payday loan?
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In addition to the amount you borrow, payday lenders generally add a finance charge that’s a percentage or dollar amount per $100 borrowed.
The amount of this finance charge can range from $10 to $30 for every $100 borrowed, depending on your state law and the maximum amount your state permits you to borrow. A charge of $15 per $100 is common. This equates to an annual percentage rate of almost 400 percent for a two-week loan. So, for example, if you need to borrow $300 before your next payday, it will cost you $345 to pay it back, assuming a fee of $15 per $100.
Different types of costs or fees for payday loans
In addition to the finance charge, you may incur other types of fees with your payday loan:
Renewal or rollover fees
If you are unable to pay when your loan is due and your state law permits rollovers, the payday lender may allow you to pay only the fees due and then the lender extends the due date of your loan. You will then be charged another fee and still owe the entire original balance.
Using the above example, if you pay a renewal or rollover fee of $45, you will still owe the original $300 loan and another $45 finance charge when the extension is over. That’s a $90 for borrowing $300 for just four weeks.
Repayment plan fees
Some state laws require payday lenders to offer extended repayment plans to borrowers who have trouble repaying their payday loan. These laws vary by state, and may or may not permit or require a fee for using a repayment plan.
If your state requires a lender to offer an extended repayment plan, you may be able to get additional time to repay your loan without any additional costs or fees. This means that you can pay off your loan rather than borrowing again, incurring more fees, and getting further behind in debt.
If your state does not offer this, some lenders may still allow you to take an extended repayment plan, which is different than a rollover. You should ask your lender about this option if you’re having trouble paying back the loan.
Late fees
In addition, if you don’t repay the loan on time, the lender might charge a late or returned check fee, depending on state law. Your bank or credit union may also impose an “NSF” or non-sufficient funds charge if your check or electronic authorization is not paid due to a lack of funds in your account.
Prepaid debit card fees
If your loan funds are loaded onto one of these cards, there might be other fees associated with the prepaid card. For example, there may be fees to add the money to the card for checking your balance, calling customer service, or simply using the card. There may also be regular monthly fees.
Be sure to read the loan agreement carefully to spot all the fees and costs before you take out a loan.
If you experience an issue with a payday loan, you can submit a complaint to the CFPB online or by calling (855) 411-2372. You can also contact your state regulator or state attorney general .