Some payday loan rates are better than others, but none of them can compare to rates available on standard loans from traditional banks and credit unions. A good rate on a credit card from a bank is less than 18 percent. However, payday loan rates can exceed 300 percent, according to the Federal Trade Commission. Finding a "good" rate on a payday loan means shopping around for the most favorable terms available on that type of loan.
Instructions
1. Learn your rights under the federal Truth In Lending Act. The act requires all lenders, including payday loan companies, to provide you with the exact cost of a loan, including the interest rate, finance charge, amount financed and total number of payments. This provides the best apples-to-apples comparisons as you shop for good payday loan rates. Ask for a sample Truth in Lending Act disclosure form at your bank or credit union to learn more.
2. Contact traditional banks and credit unions about short-term loans before considering payday loan dealers. Some traditional lenders may offer cash advance loans for regular customers that work like checking account overdrafts. The bank may approve a temporary overdraft if you have regular direct deposit of a paycheck or retirement income.
3. Contact payday loan companies in your community and online. Tell them how much you wish to borrow while requesting a Truth in Lending Act disclosure showing the complete terms of the loan. By law, you are allowed to request the disclosure before accepting the loan.
4. Call, visit or tap into the websites of as many payday loan firms as is reasonable to find the best rates available. Use the Truth in Lending Act disclosures to determine the exact costs.
