Most people know what ‘APR’ stands for, as they’ve seen it with home loans, and other sort of big pieces of money – but often times, a payday loan APR can be a very daunting thing, and for good reason.
Interesting, the maximum APR allowed to be attached to a payday loan is regulated in many states. For the borrower, this is good but even then, often a short-term loan comes with an APR that is high.
What is an APR?
Although many people do know what an APR is, some do not. In fact, many people have no understanding of a payday loan APR.
APR stands for Annual Percentage Rate, which is the annual interest rate that you will be paying on the loan itself. When you have a large loan, like a home or car loan, the APR is normally very low because it takes longer to pay back the loan.
On the other hand, a payday loan APR is somewhat different.
Payday Loan APR 101
Payday loan APR is a much, much bigger number than a home loan APR is – it has the highest interest rates on any sort of loan, but that’s because it is a very short term loan. Usually between 7 and 14 days, these loans don’t span much at all – so you usually end up only paying between $10-$40 in interest.
Normally, you will find APRs that are between 250% – 390%, which is really large except that you are just borrowing a small amount and are planning to pay it back in a fast rate of time.
There are some states that have put a cap on the highest possible APR that a Payday loan company can use. They regulate how long the loan can be and if it can be renewed or extended in any way. Some states have hugely strict laws and some have none at all.
Things to Look for in a Payday Loan
When you go looking for a payday loan APR, there are a few things that you should keep in mind. That’s the APR. The lower it is, the less you will need to pay when you are getting ready to pay your loan.
Watch out for fees, too – while the APR might look attractive at first glance, finance fees will end up costing you twice what you’re paying in interest. Keep your eye out for the best companies that offer the lowest fees, and interest rates.
Conclusion
You should borrow wisely and don’t go with a company that has high payday loan APR rates or you will feel it later.
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