Unemployment Loans
APR (Annual Percentage Rate) is the
term for an interest rate for a whole year as opposed to rate per month, as
applied to text loans or payday loans.
When it comes to trying to get a
payday loan it's a good idea to compare various loan providers and also the APR
they are charging because it does give an indication which loan company charges
more. Having said that, payday advances are normally short-term loans (from a
few days to a couple of months) so APR can be slightly misleading.
For instance, APR increases when the
loan is given for a shorter time period. You'll be repaying less if you choose
shorter term loan. As an example, a £100 loan that has to be paid back after
five days will probably have greater APR when compared to a £100 loan which is
extended over twenty days. On the other hand, if a person decides to repay the
loan in five days, the repayment sum is £110 while paying back after twenty
days it is needed that you pay back a larger sum. So lower APR will not
necessarily indicate that the amount you repay is smaller.
The annual percentage rate is based
on various factors, taking into consideration the actual interest rate of the
loan, term of the loan, repayment frequency, repayment amount and other
associated fees.
As pointed out above, a lot of
payday loan borrowers find APR a confusing way of measuring the real cost of
the borrowed funds. Many of them find that the actual repayment amount is the
proper method to evaluate how costly a loan is.
It is not unusual that payday loans
have APR of 2000% and in many cases even higher which can be rated to be
incredibly expensive. Then again, we should not forget that despite a very high
APR the actual cost of the loan might not necessarily be high.
The annual percentage rate will be
lower the longer you borrow the funds for. When you compare the APR of two
loans of the identical value over different periods of time, it would seem that
you would get a much better deal if you borrowed the cash for a longer time
period. Nevertheless, the actual cost of the loan would be much more simply
because you would need to pay back more in interest.
In conclusion, APR is the term for
an interest rate for a whole year and not just monthly rate, as applied on a
text loan or a payday loan. Considering the fact that payday advances are
usually short-term loans it could be somewhat misleading to measure annual
percentage rate mainly because APR will be lower the longer you borrow the
money for. However, the real cost of the loan would be far more since you would
need to pay back more in interest.
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