While payday loans can be a convenient borrowing option when you have bad credit, they’re also expensive financial products with triple-digit APR. And if you live in Missouri, you could be paying the highest APRs in the country.
According to stats from Consumer Federation of America, APR in Missouri can reach 1955% on a 14-day $100 loan.
Why is APR so high in Missouri? Find out the answers below.
Interest Rates Reflect Your Credit History
High interest rates tend to be the price of borrowing with bad credit. If your history shows you pay things late (or not at all), then your next APR will be higher than if you have a spotless record.
If you apply for a personal loan in Missouri, most financial institutions will raise their prices to reflect your past borrowing history, from payday lenders to mortgage brokers.
Just how high these rates go depends on more than just your credit score. Your employment history,lender, and even location play a role, too.
Missouri Has Fewer Lending Laws to Limit APR Caps
Location factors into the price you pay for bad credit because your state regulates financial institutions and how they charge for their personal loans.
Some states have banned payday loans altogether, while others tightly control how payday lenders operate.
Missouri, on the other hand, has some of the softest payday loan laws in the country. There are fewer caps on APRs here, which is why some lenders can legally charge up to 1955%.
Why Do Some People Borrow at Such High APR?
It all links back to how credit history affects your creditworthiness. If you’re recovering from rock-bottom credit, there’s a good chance some financial institutions won’t lend you money at all. And if they do, they increase their rates to reflect your past.
Some people turn to payday lenders thinking they’re the only option in an emergency. This is especially easy to do because some cash advance lenders advertise their products as online loans with no credit check.
If you know your credit score has disqualified you in the past, the promise of no credit check can be enough to apply.
Are There Any Alternatives?
Payday lenders aren’t the only financial institution willing to work with people with bad credit. There are installment loan direct lenders that are also willing to play ball.
Since Missouri has fewer caps on interest rates, there’s always a chance an installment loan direct lender also charges this much money. However, unlike payday cash advances, you won’t have to repay what you owe in 14 days (or by your next payday). You can pay back installment loans in multiple fixed payments over months.
This extended timeframe breaks up what you owe, so you don’t have to pay as much in one go. It gives you some breathing room, so you might find it easier to juggle with your other responsibilities.
Rate Shop Before You Borrow
Just because a lender in Missouri can charge a 1955% APR doesn’t mean they will. Take the time to compare rates, terms, and conditions. This research can help you find the most affordable option for your credit score before you sign along the dotted line.
