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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.

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 stands for Annual Percentage Rate, which is the annual interest rate that you will be paying on the loan itself. When you have a large loan, like a home or car loan, the APR is normally very low because it takes longer to pay back the loan.

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.

Things to Look for in 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.

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.