How do lenders charge a fee? Anytime you see the words interest rate or service fee, you can guarantee that your money will be going to the company to pay for their services. There are various reasons as to why these fees are attached to transactions. The more you understand the reasons they occur, the better equipped you will be to pay the least amount.
Payday loan lenders use the words service fees. This fee is to pay for the price of getting an unsecured loan which is usually to the risk of the lender of being repaid. There are no credit checks and people with poor credit history will be approved as long as they qualify according to the company’s guidelines. The service fee for the loan will be attached to the payoff amount which is usually expected to be paid off within two weeks of obtaining the loan. If the amount is not paid in full, there are ways to extend your loan, but interest rates will be applied to the amount owed. You can buy down on your loan by paying the interest and an amount towards your principle and interest will accrue towards the remaining balance until paid completely. There is also the option to extend or “roll over” your balance to another pay period. The interest will subject your full amount until you pay down or pay off your loan. Keeping your balance open for too long will create expensive additional charges to your account.
The law requires lenders to disclose their interest rates and provide a copy of borrower’s rights. It is up to the borrower to ask for clarity if there is any confusion. A good lender will have a qualified customer service representative team available to answer your questions.
Banks have various interest rates set up on their different loans. Short-term loans will carry higher rates than long-term loans. The banks have many “other” charges which bring them revenue. There is the well-known overdraft fee which now averages $34 per transaction. Many overdraft fees are paid right away and the problem is solved while some people turn to payday loans to pay a smaller fee and get the problem solved in just a short period of time, (www.responsiblelending.org/issues/overdraft). Bounced checks will address this charge plus an additional one from another bank if there was a transaction attempt processed there. The average shortfall fee for a debit card transaction is $17. There are holding deposits from some merchants which can be held on for longer than necessary which can increase the number of overdraft fees even if there were sufficient funds deposited. A hold on an account will keep a set amount from being used until it is lifted. There is also a problem with some banks that subtract transactions according to the transaction amount, largest to smallest, rather than the date and time of the transaction. These practices can set your account up for unnecessary charges. Wells Fargo Bank has stepped into payday lending, direct deposit advance, but they do not disclose their service fee of 10% on these direct deposits. If banks and credit unions were to disclose all of their charges there would be a new outlook on their business as well.
Spotya! Online Payday Lender take pride in being responsible lenders who follow lending regulations. We work with our customers and only approve a small portion of applications based on our qualifications which are set up to promote responsible borrowing.