What does “APR” mean on online payday loans and credit cards?

A life situation may prompt you to borrow funds to meet an urgent need. There are many sources you can borrow money from or compare loans from, even with bad credit, like READY NOW – and most, if not all, will be charged against the borrowed money. Online payday loans are no exception.

Loan sharks derive their income from charges plus interest paid on top of the principal sum borrowed.

When borrowing, it’s good to know the repayment terms, including the grace period, interest, default penalties, and other fees that may accrue. We’ll help you understand what APR means and how it’s used to determine interest on payday loans and credit cards online.


APR stands for Annual Percentage Rate. Officially, this is the rate that will help you determine the cost of borrowing from a bank, online payday loan companies, other financial institutions, and even when using your credit card.

Generally, interest rate and APR are used interchangeably, but they are a bit different. The APR is the aggregate of the interest rate and all other fees charged on the cash advance. It helps to determine the total cost of borrowing.

How do you use APR?

Before making a decision on the best option when borrowing, APR is a key guide. Literally, the higher the APR, the more expensive the loan. Since the APR is expressed as a percentage of the loan, an APR of 12% is better than an APR of 17%. However, you should always read and understand the terms and conditions before making a decision.

The APR has limitations in that it only takes into consideration mandatory charges. It does not include fees such as late payment fines, over credit limit, or payment protection.

APR Ranking

It is essential to know the type of APR that applies to your loan. Online payday lenders and credit cards can implement APR in different ways.

Variable APR

This is an APR that changes over time. An increase or decrease in the rate usually depends on the APR levels in the area. This can become an advantage if the APR is lowered later, but an APR increase will mostly be the result of penalties. You should consider how the APR varies, especially if you are applying for online payday loans without a job. The possibility of defaulting on the due date is high and can increase the overall cost.

Fixed APR

This is a case where the rates are fixed, and as a borrower you will have all the information up front. You will get a predetermined rate that does not fluctuate upon receipt and during loan repayment. The only limitation of the fixed APR is that you will not benefit from lower rates when the market changes.

Multiple APRs

Online payday loans and credit cards may have different APRs depending on the transaction. Credit cards, in most cases, use multiple APRs. For example, the rates for a cash advance when withdrawing from an ATM may be higher than for a balance transfer or for your usual line of credit.

APR Representative

This is the advertised rate that applicants will get under the deal. However, not all are eligible for the advertised rate. This means that even if you get approved, online payday loan places or the credit card provider may still charge more.

personal TAP

This is the actual APR rate given to you. The APR given can be as advertised or higher depending on individual eligibility.

Online payday loan companies decide your credit rating and the financial information you provide when applying for the loan.

How the APR credit card is determined

Some of the factors credit card companies use to determine APR are:

Your individual credit history

The higher the credit score, the lower the APR. Some credit cards may offer a variable APR depending on the borrower’s credit history.

Preferential rate

Since most credit card companies are regulated by the Federal Reserve, they must comply with set interest rates. This condition may not apply to credit cards with a fixed APR, which does not change when prime rates change.

The credit card itself

Different credit cards have different features; the same goes for APR. Some credit card companies will offer a lower APR than others. Reward credit cards, since they offer more value, may have a higher APR.

The above factors will also play an important role when determining the fees when applying through the application for payday loans online.

Determining the APR for Online Payday Loans

First, you’ll need information about the following three things:

Amount of money you are allowed to borrow

Finance charges – the amount the credit will cost

Duration of the loan (repayment period)

Let’s express this mathematically

Suppose you borrow $400 at a finance charge of $60 with a repayment period of 14 days.

Step 1 – Divide the finance charge ($60) by the amount you receive ($400) = 0.15

Step 2 – Multiply the answer (0.15) by the number of days in the year (365) = 54.75

Step 3 – Divide the answer (54.75) by the term of the loan (14 days) = 3.91071

Step 4 – Multiply the answer (3.91071) by 100 or simply move the decimal to the correct two places and add a percent sign = 391.071%. Since APR only has two decimal places, round our answer to 391.07%


Although borrowing through payday loans is subject to criticism and can seem like an expensive affair, not everything qualifies for loans. Many platforms offer personal loans online the same day, and you avoid all the formalities in other credit institutions. Most payday loan companies have an online payday loan application. The application will allow you to comfortably apply for a loan at your convenience.

Use caution when researching payday loans you can get online. Be sure to get information on online payday loans reviews, how payday loans work, fees and interest rates. Reviews provide you with information about eligibility criteria.

Be sure to pay the principal amount on or before the due date. This will help you avoid penalties which can increase the cost of the loan and the APR.

With this information, we believe you can make better choices on the best online payday loan platforms to borrow money from.

If you’re still unsure of the APR rate for an online payday loan you’re applying for, apply to Americash Payday Loans, and they’ll walk you through it.

About Judith J. George

Check Also

Are payday loans safe? Here’s how to protect yourself

Can online payday loans be safe? Even though it may seem easy and convenient to …