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January 13 2018

5832 1c23

Understanding Short Term Loan High Interest Rates

Any type of loan from a non-traditional lender will have very high interest rates. Whether it is a payday, personal, or installment loan borrowers will be paying back a great deal more than they receive. This is not news to anyone, but few people think of the total costs when they sign an agreement. They need the cash fast and make hasty decisions.

Responsible Lending

Most non-traditional lenders, such as Blue Trust Loans, clearly indicate on their websites that rates are high, late payments incur penalties, and loans should only be taken out as a last resort. There are also recommendations for credit counseling companies, suggestions of other ways to get the money needed, and tips on how to create a budget. Another way to practice responsible lending is to urge people to read and fully understand the agreement before signing it.

The purpose of a responsible lending policy is to alert customers to the fact that fast loans can result in serious financial trouble. Lenders are prepared to provide a service and will be happy to lend qualified applicants money. They just want to be clear about the original costs and how behavior may add to those costs.

Breakdown of Interest Rates

A common example posted on websites is a chart of how much interest is paid on every one-hundred dollars borrowed. An installment loan can be paid back on a weekly, bi-weekly, or monthly basis depending on the frequency at which customers are paid. A person who makes weekly payments, for example, will be paying fifteen dollars ($15) in interest alone one every one-hundred dollars ($100) borrowed. Those making monthly payments will pay sixty dollars ($60) in interest.

The maximum loan amount for first time customers is one-thousand and three-hundred dollars ($1,300). Think about that for a minute. The interest rate alone for that first month is seven-hundred and eighty dollars ($780). That total is determined by multiplying the interest rate of sixty dollars ($60) by the total one-hundred dollar ($100) units, which is thirteen (13).

Keep Doing the Math

That same thirteen-hundred dollars ($1300) divided by six (6) months of installment payments is two-hundred and seventeen dollars ($217). Adding the interest ($780) onto the principal payment ($217) for that first month totals nine-hundred and ninety-seven dollars ($997). The result is lowering the principal for the next month to one-thousand and eighty-three dollars ($1083), which will accumulate over six-hundred dollars ($600) in interest by the second month. Find another way to get the thirteen-hundred dollars.

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