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 is the acronym for “Annual Percentage Rate”. This annual rate is what is attached to a loan. In the case of something large, perhaps a mortgage loan or even a smaller loan for business purposes, the percent of the APR is generally low. The reason is that these loans take longer to pay back to the lender.

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.

Of course, there are some states that keep tight tabs on APR rates charged by these companies. Therefore, the APR allowed to charge with other factors, such as the length of the loan and whether extensions are allowed, would also be regulated. Just remember that laws are different for every state - some strict and some not so rigid.

Things to Look for in 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.

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.

Things To Remember

Remember to borrow wisely, and don’t go with a company that has too high of a payday loan APR - you’ll feel the crunch later!

Tags: Business

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