What are payday loans and why do people say to always avoid them?
user
Payday loans are high-interest short-term loans, with very high APRs. While I personally wouldn’t go into debt to get a payday loan, I’d probably get one in an emergency situation.
assistant
The amount of interest is the same thing as APR, right?
user
That’s correct, the interest you pay is the APR.  If you take a loan for a $1000, your APR is 36%, which means you’d pay 36 cents per dollar, and you’d pay off the full amount in 30 days.  If you pay it off a few days early, you’ll pay 36% of the interest.
assistant
I see. And how much higher is the APR on payday loans compared to regular loans?
user
It’s definitely different.  The largest rate I saw is quoted for a 28-day payday loan, which was 50%.
assistant
What are payday loans and why do people say to always avoid them?
user
Payday loans are high-interest short-term loans, with very high APRs. While I personally wouldn’t go into debt to get a payday loan, I’d probably get one in an emergency situation.
assistant
The amount of interest is the same thing as APR, right?
user
That’s correct, the interest you pay is the APR.  If you take a loan for a $1000, your APR is 36%, which means you’d pay 36 cents per dollar, and you’d pay off the full amount in 30 days.  If you pay it off a few days early, you’ll pay 36% of the interest.
assistant
I see. And how much higher is the APR on payday loans compared to regular loans?
user
It’s usually much higher.  A person who is borrowing $1000 and paying $100 in interest would have an APR of (100/1000) * 100% = 10%, which is the same as most loans.  If you borrow $1000 for 30 days, with an APR of 36%, then you’d have an APR of (1000 * .03) / 30 = 36%.  This means that payday loans are typically at least three times as high as the APR on most loans.
assistant
What are payday loans and why do people say to always avoid them?