Payday Loan Industry Watch Home News and RSS Newsfeeds Podcasts Reviews Tips Links
About Us
Contact Us
Site Help
Find a Lender

How do payday loan companies make money?

Payday loan companies make their money from fees

Most payday loan companies make their money when a person pays fees enough times to cover the cost of the loan amount and then a company's cost for loaning the money.

Here's an example: Take a $300 payday loan with a $90 fee due every paycheck. After five paychecks you've paid $450 in fees. The payday loan company is now probably making money from your loan. (The company has covered the cost of the loan they gave to you, the cost of getting you as a lead, and any administrative costs for handling your loan.) When you pay the company fees now, it's all profit. And, when you pay back the original loan amount (that you still owe) that's profit, also.

It may sound like payday loan companies are making fistfulls of money. But, to be fair, they're not making as much as you might think.

Payday loan fees are high because the fees cover the cost of people not paying back their fees or their loans. (A lot of borrowers never pay their payday loans back. Many people pay some of their fees--but then stop paying.)

Also, because there is a lot of risk to the payday loan company owner, the fees are higher than they might otherwise be to pay the owner for the risk he or she is taking. (And the risk is significant--if a payday lender doesn't watch his or her bottom line carefully he or she will be out of business.)

Next Tip

How do I make a complaint about a payday loan company?

Related Tips

How are payday loan companies different from other lenders? | How much more expensive is a payday loan than other credit?


See the Tips Index.

E-mail This Page Open a new window and send this page to a friend.
Share this page by E-mail.
Reviews Reviews page.
July 21 - WeGiveCash claimed we could get $1,500. But, after entering qualifying customer information, we were declined and then forwarded to another Web site to re-apply.
small payday loan industry watch logo Home News & RSS Podcasts Reviews Tips Links Find a Lender About Us Contact Us Donate / Sponsor Site Help
Terms of Use Privacy Policy Site Map copyright © 2005-2023 all rights reserved Updated: Nov 22, 2022 08:00 EST