Everywhere you look and go you will see adverts for loans, credit cards and the sentence APR. So what is APR? Well it stands for Annual Percentage Rate. This is calculated over a year, this is whey when you see the adverts for loans and credit cards the APR figure is only about 5% but when it comes to pay day loans the figure is 4940% this is why people are shocked and are kicking up a stink because of the high APR figures pay day loan lenders charge their customers. Like I said earlier APR is a calculated figure over the year, but when it comes to pay day loans the APR figure is not realistic as these types of loans are only for between a few days to a month. The shorter the loan the higher APR you will be charged. Pay day lenders have to quote the 4940% APR figure but this is not the actual APR you will be paying back.
A spokesman for the Consumer Finance Association said: “Borrow £200 from a pay day loan lender and clear the debt on day 30 for, say, £250. The APR is 1413.1per cent. Borrow £200 on an unauthorised bank overdraft and clear the debt on day 30 for £350. The actual APR of the overdraft transaction is 90,888.9 per cent.”
So hopefully upon reading this despite what people may say or people will write in the press, pay day loans do not have a high APR. Maybe if the rules could be changed they could have a different system instead of using APR they could use a daily charge figure, this will then make it more clearer to people taking out these cash to pay day loans to understand the fees that they are being charged when taking out a loan.
For more information about pay day loans or text loan lenders visit www.mymoneycredit.com
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