Payday loan: The calculation of the APR deciphered

The APR is a really important part of the payday loan. The APR must be charged properly by a particular lender, else there would be a rift prevalent between the borrower and the lender. In the previous years, the APR was limited between 36 and 40 percent. Usually over the years, the law making body of a particular country decides upon the APR which would be charged and thus no kind of dispute exists between the lender and borrower. It is really important to set a limit to the APR charged on a particular loan.


There is more than one method to calculate the Annual Percentage Loan. Depending upon the method which is being applied to perform the calculation, the results may vary greatly. Usually it is seen that the APR increases to relatively astronomical numbers when seen from the perspective of the person who is borrowing the money.

It must be duly noted that taking these loans, bears a sufficient amount of risk for the person who is taking it. In fact this was the perception when the payday loan started rolling out initially.

However in the present times, studies have shown that these loans no more carry any kind of long term risks for the person taking these loans. The lender does not stand any kind of danger after taking this particular loan. The danger is nothing more than taking any other kind of credit.

The different studies on a particular payday loan have confirmed that the dangers which may arise from taking these loans have become minimal. The study done on the loan taken by a particular lender has shown that the charged rate on the payday loan is nothing more than 3.2 percent approximately. Hence statistics as well as facts have collaborated to show that a payday loan is no more a risk borne venture.