Which type of fees are typically associated with payday loans?

Payday loans are notorious for having extremely high annual interest rates. These loans are usually short-term and cater to individuals who need quick cash, but they come with significant financial risks. The annual percentage rates (APRs) on payday loans can range from 300% to over 1,000%, making them one of the most expensive forms of borrowing available.

This high-interest model is designed for the lender to recoup their investment quickly since payday loans are often due in a short timeframe, sometimes as little as two weeks. Borrowers might not fully comprehend the costs associated with these loans at the time of borrowing, leading to a cycle of debt if the loan is rolled over due to inability to repay on time.

Thus, the high annual interest rates are a defining characteristic of payday loans, distinguishing them from traditional loans, which usually have much lower interest rates. In contrast, other fees associated with these loans, such as processing fees or late payment penalties, can vary and may not always be present depending on the lender's policies.