How Much Does a $1000 Payday Loan Cost?

Author · Modified on 29 October, 2022

$1000 Payday Loans cost $1100 after 1 month, $1206.33 after 3 months and $1377.66 after 6 months.

With Dime Alley, you can get a $1000 Payday Loan, Installment Loan or Cash Advance and repay your loan in as soon as 1 month or as long as 60 months-time.

Payday Loans are short-term loans designed to cover emergency bills or expenses, not for long-term purposes.


1000 loan cost
$1000 Payday Loan cost breakdown


Should I Get a $1000 Payday Loan?


If you are hit with an unexpected bill or expense such as a medical bill, vet bill or car repair bill, then a payday loan could be a good option for you.

Whilst the average loan is usually for around $300 – $500 and is repaid in under a month, a $1000 Payday Loan could be a better option for you if the bill you’re hit with is more serious or urgent.

The APR for a payday loans greatly varies depending on the state you live in and your personal criteria, such as credit score and residential status which can impact the rate you are charged. In some states, the APR could be as high as 300-600%, whereas in others, there is a cap of 36% on payday loan rates.

It is important to note that a Payday Loan is a short-term loan – it is not meant for frivolous or unnecessary spending, but rather to cover an emergency or to tide you over until your next payday.


How Much is a $1000 Payday Loan?


$1000 Payday Loans cost $1100 after 1 month, $1206.33 after 3 months and $1377.66 after 6 months.

Payday loans can often be expensive because they are unsecured and therefore, lenders will often have to compensate for a large default rate.

The APR is high because the loan interest is calculated as though it lasted a year, when it only usually lasts a few weeks or a few months.

If you cannot keep up with repayment, you could face additional late fees, added interest and a negative impact to your credit score.

If you start using multiple payday loans, fall behind on payments or use “top-ups” (known as rollovers), this is where a payday loan becomes very expensive and can have a real drain on your finances.

Payday loans can be useful, but you should always consider how you are going to repay them on time and avoid future debt or late repayment.


Why Are Payday Loans Expensive?


They are unsecured loans.


Payday loans are usually unsecured, meaning that you do not need to use any security or collateral when applying and therefore the lender has nothing to collect or repossess if you cannot repay your loan.

This means that you eligibility is based on factors such as your income, employment and credit score – but the lender has to charge you a bit more than the average loan, because if you cannot make your repayments, the lender loses out and they cannot repossess anything to recover their debts.


Statistically, they have high default rates.


Payday loans have a high default rate, ranging from 15% to 25% depending on the lender and this is the percentage of customers who cannot make repayments on time or at all. It is therefore classed as ‘bad debt’ and the lender ultimately loses this money.

Unfortunately, this means that rates need to be a little higher to make up for the losses of other people. Does this mean that good customers might be paying a little more for their loans? Yes, this may be the case, but thus is the nature of the product.


Payday Loans are short-term loans.


This source of finance is designed to be short-term and therefore the rates are higher to reflect this and also make it worthwhile for the lender. After all, if they are going to be lending you a large sum of money, such as $500 or $1,000 for just two weeks, it is a lot of risk for them and therefore they need to charge you a decent interest rate to make it worthwhile.

To give an example, a mortgage lender or bank charges low rates of just 3% or 5% per month, but the loan lasts for 5,10 or 25 years – so overall, the interest charged is relative to the duration of the loan.


What Happens If You Are Struggling to Repay a Payday Loan?


If you cannot keep up with repayments, this is where the cost of payday loans can really start to add up. With late fees and additional interest, the overall balance starts to mount up and it will also have a negative impact on your credit score, making it hard to get access to finance in the future.

Therefore, to avoid any legal action and additional fees, you should always consider how you are going to repay your loan on time.

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