Payday Loans APR
Annual Percentage Rates or APRs are a part of all types of credit loans whether they are payday loans, short-term loans, personal loans, credit cards, mortgages or any other types of credit agreements.
Below is a list of some of the major UK payday loan lender rates*
Representative APR taken from the following sites:
|One Month Loan||2957.30%|
|Open Door Loan||2235%|
|Wage Day Advance||2814.20%|
*Correct as of December 12th 2011 taken directly from Lender websites and subject to change. PaydayHappy.co.uk is not responsible for any changes, errors or omissions to this list. This is NOT a list of PaydayHappy.co.uk lenders but rather a sample of UK Payday Loan Lenders.
When you take out a loan you are charged interest on it that is paid over the length of the loan. APR actually describes what the true cost of borrowing money is over the course of a year. It includes the interest rate you pay on your loan as well as how you pay back the loan, how much the repayments are, the length of repayment, additional charges and fees and any payment protection insurance premiums you may have with the loan.
APR measures how much a loan or other line of credit costs you in interest over one year and is expressed as a percentage of the total amount of money that you borrow. If you want to work out the APR you pay on a loan first take the amount of your loan and how much interest you will be charged over one year. Then divide that interest amount by the amount of your loan. Multiply the number by 100 and you get your APR.
For example, you borrow £1,000 and are charged £80 in interest for that year. The APR is calculated like this:
80/1000 x 100 = 0.08 x 100 = 8%
Normally you know what the APR is before you know how much the interest you will be charged is, so you can determine how much your interest over the course of a year is by using this formula:
1000 x 8% = 80
The Consumer Credit Act 1974 requires lenders to include the APR in all credit agreements, including loans that are for a relatively short period. They must display their 'typical' APR in advertisements and the APR can vary from lender to lender as well as across the different products they offer.
Banks, Credit card companies, payday loan companies and other lending institutions are required by UK law to clearly illustrate their own APR rates. So you can compare one APR to another and find the best rate.
Lenders can also advertise their current APR in monthly terms instead of in annual terms. This is why you see APRs for as low as 2% per month. When you apply for a line of credit, the lender must tell you what the actual APR is. So if the monthly APR is 2%, the annual APR equals 24%.
It is important to know that not everyone will qualify for the 'typical' APR advertised. The actual APR charged might be determined by your credit history, income or other criteria the lender applies.
Short-term and payday loans are usually for just a few days or weeks, the APR sum not only multiplies the actual period of interest up to a year's duration, but also compounds it, assuming interest-on-interest many times over. The result is a distorted number that bears no relation to the actual interest involved.
While it is a legal requirement to display the APR of the loan, short-term loans should never be considered as long term financing, in fact they are just the opposite as suggested by their name.