The annual percentage rate (APR) of a payday loan is a helpful tool to compare rates of lenders. According to the ?ruth in Lending Act,
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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,
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For our example, we will use a loan fee of $15 for every $100 borrowed. This is a quintessential 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,
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For instance,
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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,
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Cash advances are optimal utilized for temporary emergencies,
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See our recommended payday loan companies online by visiting this page:Recommended Payday Loan Lenders Online.
Carrie Reeder is the owner of ABC Loan Guide, an informational website about various types of loans.
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