APR stands for Annual Percentage Rate. If you are like most consumers, you probably do not know how to calculate APR on a payday loan. Luckily, the process is not exceedingly difficult to do and the answer you get will help to clarify how much these loans really cost. Borrowers simply need to divide the total finance charge of their loans by the total loan amount. The resulting answer should then be divided by the actual loan term in days.
This is the formula for calculating APR
APR = ((Loan Fee/Loan Amount) / (Loan Days/365) * 10000) / 100
Using An Online Calculator
If you are not mathematically inclined there are online calculators that will crunch the numbers for you. These help people to avoid the hassles of learning how to calculate APR on a payday loan, even as they become able to gain the best deals from the cash advances that they secure. Borrowers simply plug in the numbers for the finance charges, the loan amount and the loan term and the APR will be given to them in a matter of seconds.
Click here to see APR Calculator
What You Should Know About Payday Loan Fees
There are several important things to consider when calculating APRs. The first is whether or not paying the extra money that a loan will cost is actually worthwhile. In some instances, getting money through payday loan lenders to pay past due bills can actually be more cost-effective than letting the bills fall further behind. This can be true even when high interest rates and other fees are charged.
For instance, some borrowers may need to secure a payday advance in order to pay a severely overdue utility bill. If a payment is not made, the services will be shut off. Not only will the consumer have to suffer the inconvenience and possible danger of not having essential household utilities, but a service termination of this type can actually be quite costly. In addition to the full amount of past due payments, some utility companies will charge substantial service restoration charges and large account deposits before utility services will be restored. In this event, a payday loan is likely to be cheaper by far, in spite of the high APR that it might entail. Conversely, however, if you are considering a short term loan of this type for mere movie money over the weekend, the high costs of doing so are hardly justified by the cause.