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APR stands for Annual Percentage Rate. It’s the interest rate you’re charged on a loan, over the course of a year. APR can be applied to mortgages, car loans, credit cards, and even payday loans, even though payday loans are usually only last for a few weeks or months. We’ll go through how to calculate payday loans APR thaat last less than 12 months.

It’s important to understand APR, so you can make informed decisions about your finances. In this article, we’ll explain what is APR and how it works. We’ll also provide some examples to help illustrate how APR affects your wallet.

What is APR?

APR, or annual percentage rate, is the amount of interest you pay on a loan, credit card, or other lines of credit each year. APR is expressed as a percentage and includes both the interest rate and any fees charged by the lender.

How does APR work?

Here’s how APR works. Let’s say you’re taking out a $100,000 loan with an APR of 5%. That means you’ll pay $5000 in interest each year. Here is the complete formula for calculated APR (source:

APR = ((Interest + Fees / Loan amount) / Number of days in loan term)) x 365 x 100

To calculate your APR, you can use this tool. It also helps to know the APR range for different types of loans. Here’s a quick guide:

  • Mortgage APR: 3-5%
  • Auto loan APR: 2-7%
  • Personal loan APR: 5-35%
  • Credit card APR: 12-30%
  • Payday loans APR: 35-800%

How to calculate APR for loans lasting less than a year?

The calculation for loans lasting less than a year is exactly the same as the above.

Let’s look at an example:

Say you are borrowing $1,500 for 3 months, $150 fees, and $350 in interest.

APR = ((350+150 / 1500) / 90) x 365 x 100 = 135.18%

However, lenders in the United States are legally required to display the APR for their loan products, so you won’t need to calculate this yourself. You could easily compare different loan offers by the APR presented.

You’ll find that because payday loans are paid back over a very short period of time, even if the overall cost of interest and fees you pay for the loan are the same as for longer-term loans, the APR is concentrated, and will appear very high.

Be careful with judging loans strictly on APR – comparing loans based on the total cost makes more sense if you are comparing loans of different terms (such s comparing a 3 month loan with a 1 year loan). Using APR for comparison is perfect when you compare loans of the same length.

The average APR for payday loans is around 400%

Why is APR important?

APR is important because it allows you to compare the total cost of different loans. For example, a loan with a lower interest rate but higher fees may have a higher APR than a loan with a higher interest rate and no fees.

By understanding the APR, you can select the best loan product for you. The lower the APR, the cheaper the loan. You can avoid paying more in interest and fees over the life of your loan of you compare the APRs of the credit products you’re interested in.

What’s the difference between APR and interest rate?

APR includes the interest rate plus fees and other costs. The interest rate only takes into account the cost of borrowing money expressed as a percentage. APR is the total cost of borrowing money expressed as a percentage.

What factors affect APR?

APR is affected by the interest rate, fees, and other costs associated with a loan.

APR is also affected by the term of the loan, which is the amount of time you have to pay back the loan. The longer the term, the lower the APR, usually. However, the longer the term, the higher the total cost of borrowing in general, so be mindful of that.

Another factor that can affect APR is whether the loan is secured or unsecured. A secured loan is one that’s backed by collateral, such as a car or house. An unsecured loan is not backed by collateral. Secured loans will have lower APRs than unsecured loans.

APR can also be affected by your credit score. Loans with higher APRs are typically offered to borrowers with lower credit scores because they’re considered to be higher risk.

Finally, the state you’re in can also affect your APR, as there are different regulations and restrictions on APR in each state. In New York, for instance, payday loans are prohibited, while others have APR caps in place (ie. a maximum PR chargeable, usually around 300 or 400%), such as Texas.

Is APR fixed or variable?

APR can be fixed or variable. Fixed APR means the interest rate will not change during the term of the loan. Variable APR means the interest rate can change during the term of the loan.

The benefits of a fixed APR are that you know how much your monthly payments will be and you can budget accordingly. The downside is that if interest rates go down, you’ll still be paying the same APR.

When it comes to a variable APR, the benefit is that you may end up paying less interest if rates go down. The downside is that your monthly payments could increase if rates go up. If you need stability in your monthly repayments, opt for a fixed APR loan.

What’s a representative APR?

Representative APR means that the majority of customers (ie. at least 51%) re offered that APR. You can look at it as kind of an average. Your APR offered may be very different from this number, though. The APR you’ll get offered will depend on a number of factors we listed above in this article. 

What if you can’t afford to pay the APR anymore?

If you can’t afford to pay your APR, you have a few options. You can try to negotiate a lower APR with your lender. You can also look into refinancing your loan.

Refinancing is when you take out a new loan to pay off an existing loan. The new loan may have different terms, such as a lower APR.

If you can’t afford to make your mortgage payments, you may be at risk of foreclosure. This is when your lender takes back your house because you haven’t been making payments.

If you’re borrowing another type of loan, such as a car loan, you may be able to sell the item you purchased with the loan and use the money to pay off the loan.

As you can see, selecting the loan with the best APR option is important because it can save you money in the long run. It can also be the difference between being able to afford your payments or not. Be sure to do your research when taking out a loan so that you can avoid any future difficulties.

Can APR be negative?

No, APR cannot be negative. APR is the cost to borrow money and is always positive. If the APR was negative, it would mean you were being paid to borrow money, which is not the case.

You can use APR to compare loans of the same length. You can use total cost of credit to compare loans of different lengths


When APR is applied to your loan, it’s important to remember that APR is just one factor to consider. But it’s a helpful percentage to understand the total cost of borrowing money, which includes the interest rate plus other fees.

APR is also affected by the term of the loan, your credit score, and whether the loan is secured or unsecured. Keep all of these factors in mind when choosing a loan so that you can get the best deal possible.