Low Interest Payday Loan How To Figure Out The Apr Of A Payday Loan

Low Interest Payday Loan How To Figure Out The Apr Of A Payday Loan



Low Interest Payday Loan - How to​ Figure Out the​ Apr Of a​ Payday Loan
The annual percentage rate (APR) of​ a​ payday loan is​ a​ helpful tool to​ compare rates of​ lenders .​
According to​ the​ Truth in​ Lending Act,​ passed by Congress,​ payday companies are to​ provide you​ with the​ APR .​
Some companies list this information on​ their site,​ while others only provide the​ fee amount and give you​ the​ APR after you​ have submitted an​ application.
You can figure out the​ APR based on​ the​ fee amount by using the​ following formula .​
This way you​ will have an​ accurate way to​ compare costs,​ enabling you​ to​ find the​ best deal.
The Formula
Begin by multiplying the​ payday loan fee by the​ number of​ pay periods in​ a​ year .​
So if​ a​ payday loan lender charges a​ fee every two weeks,​ then there are 26 pay periods.
For our example,​ we will use a​ loan fee of​ $15 for every $100 borrowed .​
This is​ a​ typical rate,​ although you​ can find lower rates for first time borrowers.
The formula looks like this:
15 (loan fee) x 26 (pay periods) = 390
The 390 equals the​ yearly charge for the​ loan .​
To find the​ percentage rate,​ we will have to​ do one more step .​
Divide the​ yearly charge by the​ loan amount,​ then times the​ total by 100 to​ get the​ percent.
For instance,​ we will take 390 and times it​ by $100 since that was our original loan amount .​
The formula is:
390 (yearly charge) x 100 (loan amount) = 3.9
3.9 x 100 (to get the​ percent) = 390% (APR)
What It Means
Payday loans give you​ a​ cash advance with the​ intention that you​ will pay back the​ loan on​ your next payday .​
You will not be paying $390 in​ finance fees for the​ year,​ only the​ $15 for the​ pay period .​
However,​ if​ you​ roll over the​ loan,​ you​ will be racking up the​ finance charges.
Cash advances are best used for temporary emergencies,​ like covering a​ bounced check or​ car repairs .​
For longer term credit,​ it​ is​ better to​ look at​ a​ credit card or​ personal loan .​
While these types of​ loans will affect your credit score,​ they will also provide better rates.




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