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Before you take out any payday loan you need to make sure you understand how they work – the procedure, fees, ect. of these loans.  This is especially true for small 100 dollar loans.  While this might sound a little strange, there are a few specific issues involved when you take out a smaller cash loan from payday lenders.  In this post we will discuss these issues, hopefully giving you some food for thought before you decide to take out a 100 loan.

Main Issue – Annualized Interest Rates

The main issue with such small dollar loans is that the annualized interest rates literally skyrocket for such small loans…and most people don’t realize this.  The issue stems from the fact that most lenders have a bottom-line fee that you must pay to take out the loan, and that fee has a floor of usually $25.  While $25 doesn’t seem to be that much money, it can be very deceiving – if you have to pay the loan back in 7 days (which many times you do), that amount ends up being over 1,300% on a 100 dollar loan, making this probably the most expensive loan that someone could ever take out.

The second issue is the fact that people look at the $25 fee and think – ‘that’s not that much money’.  True, $25 isn’t a ton of money, but what they don’t realize is that $25 can grow quite rapidly into something over 4 times that amount if the loan is not paid off properly and on time.  Make sure you pay the loan back in full (i.e. interest plus loan amount) on time, otherwise you will have to pay late fees, possible collection fees, and even other fees – fees which can bring the total amount due to over $200 very quickly.

Bottom Line

Don’t let the small dollar amount deceive you into thinking that taking out a 100 payday loan is not a big deal.  These loans should be avoided at all costs and only used in emergency circumstances.