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Almost everyone knows what APR stands for because they have seen it in home loans and other loans that they may have had to get or know about. A payday loan APR can be a hard thing to understand 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.

What’s APR?

Some people don’t know what APR is, or what payday loan APR is - or if it’s different at all.

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

Unfortunately, a payday loan APR is extremely high, in fact, the highest interest rate seen with any type of loan. Since this is a short term loan, which is usually no more than 14 days, the loan companies can get by charging unbelievable rates. As a result, people going this route could easily be charged anywhere from $20 to $40 in high 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.

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.

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.

Tags: Money

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