Today, the majority of people in the United States know what APR is, while understanding this is something attached to mortgage loans. However, a payday loan APR also exists, which is not understand as well.

Many states have regulated the maximum APR for payday loans, which is a good thing – but don’t think that it’s only going to be something like 10! A short term loan often has high APR.

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.

How Does This Work?

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 Searching for a Payday Loan…

If you are in the market for a payday loan APR, then remember that the lower the interest rate the less amount of money you would be required to pay back on the actual 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.

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.