The best way to assess just how big the interest rates and loan fees are tied to payday loans is to use payday loan APRs. An APR, short for annual percentage rate, puts all loan charges on the same footing allowing for easier and more objective comparison. In this article, we will look into payday loan APRs as a means of helping you appreciate just how much extra money you are paying to your creditors by repetitively relying on payday loans for a quick infusion of cash. You learn about payday APR’s on OnlinePaydayLoans.net
Suppose you get two loans, one for $100 that matures in a week and requires you to pay $115 in total after loan maturity and a second loan for $1500 that matures in 6 months at a 2.3% monthly rate. The first loan certainly looks easier to manage since the money involved is at a much lower level; hence, there is a tendency for many people to prefer the first loan over the second one. But does a simple APR calculation support this assessment?
Using known formula for APR calculation, the first loan gives you an APR of 7.82 or 782%. In contrast, the second loan will eventually require you to pay $205 after 6 months and has an effective APR of 27.6% which is much friendlier than the first arrangement. All told, you are saving yourself huge amounts if you take the second loan instead of committing yourself regularly to the first type of loan without regard for the short-term interest rates that defines it.
It is precisely this calculation that tells you why short-term loans are to be avoided where necessary. Even when the amounts all seem to be too low to worry you, the fact of the matter is that repetitively committing yourself to these types of loans forces you to spend way more than what you expect. If offered upfront for a loan with an APR of 782%, you certainly wouldn’t commit to embracing that arrangement but since you are oblivious to the APR, you tend to do it without question.
The morale here is to be informed and aware of the implications of loans, particularly those that are short-term in nature. The best way to do this is with payday loan APRs which helps you contextualize the nature of the loans better. So the next time you find yourself in a financial binge, take the time to assess your situation and the options available to you. Instead of jumping to the most accessible loan, be open to considering longer-term offers in order to limit your loan charges. It’s the best thing you can ever do to your financial situation as opposed to continually relying on loans that put you in even greater debt. Your wallet will certainly thank you for it.