What Charges Apply To Payday Loans Other Than Interest?

We all know the most basic principle of a loan - we will have to pay to use the money. Obviously, this is the case with almost every financial facility in existence, and it is the reason that banks make so much money (we have so much debt).

However, for payday loans, interest is certainly not the only charge that you will come to expect from the financier. Because the payday loan will be made to you for such a short period of time - the reality is that if a bank or finance company only charged interest on the outstanding balance, they would make very little income indeed.

This means that they ultimately need another avenue of making money - and this is where additional charges such as application fees, drawdown fees, and termination fees apply.

Let’s take a look at each of these to see exactly what they are and why you should keep them in mind when applying for a payday loan.

Application Fees for Payday Loans

Application fees can be some of the steepest fees around for people wanting a payday loan. Most finance companies charge between $100 and $300 just for the application to be reviewed (which is often refunded back to you if the application is not successful). In some cases, however, where the application needs urgent attention, the application fee can be around the $500 mark.

Obviously, it pays to talk to the financier to see whether or not an attractive rate can be negotiated - as usually application fees are highly variable.

Termination Fees and Drawdown Charges

Many finance companies also hit you with a secondary application fee (or draw down fee) when you are successful with your application for a new loan. If you are lucky enough to get the facility first time around - this fee might be waived.

Again however, it always pays to discus this type of fee with the bank - because it is almost never set in concrete.

Finally - a termination fee is a variation on an application fee, and is an amount that is charged when the facility is completely repaid. If there is a termination fee, it is likely that this completely replaces the application fee - and vice versa. It is highly unlikely that you would be forced to pay both an application fee and a termination fee.