What Is A Payday Loan APR
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.
There are many states that have regulated the maximum APR for payday loans and this is a really good thing. It’s not going to be close to what you are thinking for an APR though. Try looking a lot higher because a short term loan often has a very high APR.
Understanding an APR
Some people don’t know what APR is, or what payday loan APR is - or if it’s different at all.
APR stands for Annual Percentage Rate, which is basically the annual interest rate on the loan itself. With large loans, like a home loan, or small business loan, the APR is usually very low, mostly because the loan is paid back over a long period of time.
On the other hand, a payday loan APR is somewhat different.
Payday Loan APR 101
Payday loan APR is a bigger number than the home loan APR because it has one of the highest interest rates on any sort of loan because it is so short term. These loans are normally between 7 and 14 days so they are very short so you normally only pay around $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.
When You Are Looking For A Payday Loan
When searching for a payday loan APR should be something that you keep at the top of your head. The lower the APR, less that you have to pay when you’re going to pay back your loan.
However, sometimes people overlook the fees. What happens is that they see the APR and believe it is reasonable but once fees are added, they realize they are paying outrageous fees for a loan. Therefore, it is always best to look for loan companies that offer not only a low APR, but also low fees.
Things To Remember
Of course, borrowing money is serious business so it is important to choose one that can get the payday loan APR that will not put you in further debt.
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