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Implications of Late Payments

When short term loans are not repaid on time, lenders have several options available to them for the purpose of debt collection. You should be sure to review these terms before you provide your signature on any contractual loan document.

Implications of Non-Payment

  • Financial implications — The costs associated with short term loans can increase substantially when they are not repaid according to the initial agreement. The standard charges are between 15% and 40% of the total loan amount, and the interest on the loan may continue to accrue for as long as the loan remains unpaid. Other additional fees may average $20 for non-sufficient funds at the time of scheduled repayment and an additional 10% of the principle balance in the form of late fees after 15 days have elapsed.
  • Collection practices — Lenders may contact you via email, text message and telephone in an effort to collect the money you owe. Most of the time, they attempt to collect their own debts rather than sell your debt to a collection agency or sue you in court. All of the collection practices must adhere to the Fair Debt Collection Practices Act as set forth by the FTC. You can find these guidelines on the FTC’s website. (http://www.ftc.gov/os/statutes/fdcpa/fdcpact.shtm)
  • Impact on credit score — When debts are not promptly repaid, lenders reserve the right to report your payment history to the major credit reporting bureaus. This may impact your credit score negatively and will remain on your credit history until the loan is repaid in full. You may not be able to procure any further short term loans from any other lenders until this debt is repaid.
  • Renewal policy — Some lenders set up automatic loan renewals for you as soon as you provide your signature on the loan documents. This means that if your loan is not repaid on the scheduled date, it will renew automatically — and with additional charges. You may also contact the lender to repay the loan in full or make payments on the principle balance. The minimum renewal term is 15 days.

Disclosure of Fees Including the APR

The APR, or Annual Percentage Rate, associated with a short term loan is the percentage of the loan that would be charged in interest over the course of a full year. While the APR associated with short term loans is typically between 260% and 1825%, you will typically not pay this much because the loan is designed to be repaid in such a short amount of time. In fact, the APR associated with these loans is lesser than the charges associated with bounced checks or overdraft fees.

APR Comparison Table

How does the APR for a single payment small dollar loan compare to other options? Compare your options for the cost of $100 extension of credit for
14 Days
Product Type (single repayment) Charge APR
NSF + Bounced Check $45.00 1,173.21%
Overdraft Fee $30.00 782.14%
Late Fee $20.00 521.43%
Small Dollar Loan $10.00 260.71%
How does the APR of a small dollar loan compare to the consequences of being unable to obtain a small dollar loan? Consider the cost of a $100 extension of credit for
2 Days
Product Type (single repayment) Charge APR
NSF + Bounced Check $45.00 8,212.50%
Overdraft Fee $30.00 5,475.00%
Late Fee $20.00 3,650.00%

APR Calculations

$100.00 Amount Financed, $120.00 Repaid 2 days after the borrowing

Interest earned on last day but not the first, so 2 days earning: Per Diem uncompounded Interest = 3,650.00% per 365 day year = APR

$100.00 Amount Financed, $130.00 Repaid 2 days after the borrowing

Interest earned on last day but not the first, so 2 days earning: Per Diem uncompounded Interest = 5,475.00% per 365 day year = APR

$100.00 Amount Financed, $145.00 Repaid 2 days after the borrowing

Interest earned on last day but not the first, so 2 days earning: Per Diem uncompounded Interest = 8,212.50% per 365 day year = APR

$100.00 Amount Financed, $110.00 Repaid 7 days after the borrowing

Interest earned on last day but not the first, so 7 days earning: Per Diem uncompounded Interest = 521.43% per 365 day year = APR

$100.00 Amount Financed, $110.00 Repaid 14 days after the borrowing

Interest earned on last day but not the first, so 14 days earning: Per Diem uncompounded Interest = 260.71% per 365 day year = APR

$100.00 Amount Financed, $120.00 Repaid 7 days after the borrowing

Interest earned on last day but not the first, so 7 days earning: Per Diem uncompounded Interest = 1,042.86% per 365 day year = APR

$100.00 Amount Financed, $120.00 Repaid 14 days after the borrowing

Interest earned on last day but not the first, so 14 days earning: Per Diem uncompounded Interest = 521.43% per 365 day year = APR

$100.00 Amount Financed, $130.00 Repaid 7 days after the borrowing

Interest earned on last day but not the first, so 7 days earning: Per Diem uncompounded Interest = 1,564.29% per 365 day year = APR

$100.00 Amount Financed, $130.00 Repaid 14 days after the borrowing

Interest earned on last day but not the first, so 14 days earning: Per Diem uncompounded Interest = 782.14% per 365 day year = APR

$100.00 Amount Financed, $135.00 Repaid 7 days after the borrowing

Interest earned on last day but not the first, so 7 days earning: Per Diem uncompounded Interest = 1,825.00% per 365 day year = APR

$100.00 Amount Financed, $135.00 Repaid 14 days after the borrowing

Interest earned on last day but not the first, so 14 days earning: Per Diem uncompounded Interest = 912.50% per 365 day year = APR

$100.00 Amount Financed, $145.00 Repaid 14 days after the borrowing

Interest earned on last day but not the first, so 14 days earning: Per Diem uncompounded Interest = 1,173.21% per 365 day year = APR