When shopping around for credit, the annual percentage rate (APR) is often one of the main deciding factors when move forward. Whether it’s for a credit card, a car loan or a short loan, people tend to look for the lowest APR available.
With short loans, you will find that the APR looks very high when compared to other forms of credit and we wanted to take a little time to explain how it works and why this is.
Your Loan’s Rate
At 100DayLoans.co.uk, to help explain the loan you may receive from one of our lenders, we use a representative rate of 1734% APR. This calculation includes a number of variables such as:
• Interest rate
• Loan duration
• Payment specifics
• Some loan fees
The APR, however, does not account for all costs when it comes to your loan. Fees for late payments, missed payments and other circumstances are calculated separately by our lenders.
The way in which your short-loan terms are calculated, especially when it comes to APR, can often be confusing for consumers. Thus, we are seeking to clarify what your APR for your short-loan means.
What a 1734% APR Really Means
When you see that number in comparison to the two or one digit counterpart on other loans and credit, it may seem shocking. Understandably, no one would want that sort of interest, even on a small loan. However, when broken down, the impact is significantly lessened.
The APR for small loans is calculated over the course of a year. Since these loans are not meant to sustain you for a year, the interest cost in money is far less than the APR would suggest. Given the size of the loans and the time period of the loan, you won’t actually be charged an annual amount.
With 100DayLoans.co.uk’s lenders, you will likely pay fixed finance charges between £10 and £14.75 per £50 borrowed. For example, in an excellent rate tier, a loan amount for £50 would likely have a charge of £10; therefore the final repayment amount would be £60.
How Short-term Loan APR’s Compare
On paper, it seems as though short-term loans may not be the best financial commitment out there, but if handled correctly, the charges involved can be fairly minimal. Often, a finance charge for a small loan can be a fraction of the amount of an overdraft fee.
Late fees, missed payment fees and other charges could raise loan costs. However, responsible borrowers can keep loan charges somewhat low if they adhere to loan terms agreed to with their lenders.
Be sure to understand all of the elements of your small loan before deciding to proceed. The exact terms of a loan are determined on a lender to lender basis. The above examples are just that and do not reflect the specific charges that may be calculated into the terms of your loan.