How To Take A High Interest Loan And Avoid The Debt Cycle Smart change: personal finance
But the “simple loan” of the American bank offers a rare example. The loan typically has an APR of around 71%. Borrowers with automatic payments pay a fee of $ 12 for every $ 100 borrowed and repay the loan over three months.
OppLoans, a Chicago-based online lender, provides loans to borrowers with bad credit and has APRs of up to 160% in some states. CEO Jared Kaplan says it’s more expensive for his business to acquire and subscribe to customers, resulting in higher rates.
“Whether [your APR is] at 79, 99 or 160, you’re dealing with a risky customer base and the price should justify that risk, ”he says.
Choose a lender who verifies your financial data
Lenders who do not determine your repayment capacity using information such as your income, existing debts, and credit information tend to offer high interest loans with short repayment periods, which makes them difficult to repay and traps you in a cycle of debt.
Banks and other lenders who can access your bank account information and payment history can determine if you can afford the loan.
Simple loan applicants must have a checking account for six months and have direct deposits sent to the account for three months before they can apply, said Mike Shepard, senior vice president of consumer loans at the US Bank.