How long does it take to pay off a $400 loan? It depends on the interest rate.
James* got a loan for $400. The interest rate was so high, he could never pay it off. Why? Because the fees piled up too fast. He paid $50 every month for three years. That’s more than a thousand dollars; way more than the $400 he borrowed. “When will I finish paying the loan?” he asked the woman behind the counter. She wouldn’t tell him. The printer was broken, she said. She couldn’t print the document with the interest rate and the balance.
You have the right to know your loan balance and interest rate. When James* finally got a statement in writing, it said he owed more than he borrowed. His interest rate was 189%.
James* had a title loan. He signed over his truck for a $400 loan, agreeing to a contract with a title company that allowed them to take ownership if he didn’t repay on time. Borrowers typically receive 25–50% of their vehicle’s value and have about 30 days to repay. During that time, they can continue driving the vehicle, though lenders often keep a copy of the keys and may install a GPS tracker. If the loan isn’t repaid, the vehicle can be repossessed.
Payday loans are small, short-term loans—typically $500 or less—meant to be repaid by your next paycheck (usually within 2 to 4 weeks). Borrowers either write a post-dated check for the loan amount plus fees or authorize the lender to withdraw funds directly from their bank account.
For example, in Texas, if you borrow under $30, you may owe $1 for every $5 borrowed. While payday loans are legal in Texas, they come with an average annual percentage rate (APR) of 662%, significantly higher than the 12–30% APR typically associated with credit cards. Despite these extreme rates, payday loans remain common, especially among individuals with poor credit who may not qualify for traditional loans.
We helped James* get relief from an unfair loan and avoid losing essential property. He is now free from the financial burden and uncertainty that plagued him for years. With our help, he regained stability and peace of mind.
We can help you end the cycle. If you or someone you know are facing financial difficulties in relation to payday or title loans, you can apply for free legal help by visiting www.LoneStarLegal.org or calling 1-800-733-8394.
Payday and Title lenders have the right to charge high interest rates, but borrowers have rights, too. You can find more information at Texas Law Help, here: https://texaslawhelp.org/money-debt/debt-collection-payday-loans
And at the National Consumer Financial Protection Bureau, here:
https://www.consumerfinance.gov/ask-cfpb/what-is-a-payday-loan-en-1567/
Lone Star Legal Aid (LSLA) is a 501(c)(3) nonprofit law firm focused on advocacy for low-income populations by providing free legal education, advice, and representation. LSLA serves millions of people at 125% of federal poverty guidelines, who live in 72 counties in the eastern and Gulf Coast regions of Texas, and 4 counties in Southwest Arkansas. To learn more about Lone Star Legal Aid, visit our website at www.LoneStarLegal.org.
Media contact: media@lonestarlegal.org