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6. What is APR and what is the average APR for a payday loan?

The APR (annual percentage rate) is the yearly interest rate charged for a loan. It represents the actual annual cost of funds over the period of the loan expressed as a percentage. It includes any additional costs or fees related to the transaction. The APR can help you to compare different loan offers.

Payday loans come with very high APRs. According to the Consumer Financial Protection Bureau, the cost of a payday loan could range from $10 to $30 per $100 borrowed. For example, a 2-week payday loan that has a fee of $15 for every $100 borrowed will have an APR of nearly 400%. That’s much higher than credit card debt, which may have an APR of 12% to 30%.  

The actual cost of a payday loan may not seem like much but it can add up quickly because most Americans who take out a payday loan take multiple loans every year.

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