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.
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?
Many people don't know what an APR really is, or what a payday loan APR is 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
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.
To show just how astronomical these rates are consider that APR rates for payday loans are most often between 250% and 390%! This in itself is a ridiculous number but then when you consider the loan itself is small, if it can be paid back quickly, the rate is not so painful.
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 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 your fees also, an APR may look good at first, but then the fees will end up costing you more then you are paying in interest. Keep your eyes open for the best companies that offer you the lowest fees and rates.
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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