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 So why didn’t you get the advertized loan rate? When lenders advertize loans they typically display ‘representative APR.’ This represents the average interest applied to the loan that you are applying for. If approved, you may be offered a different – and often higher – rate.  So, are you wondering why this is the case?

The simple answer is that representative APR is different from regular APR. Representative APR represents the average borrower’s APR, while your circumstances may differ from the average borrower’s. For instance, if your credit history is weak lenders may offer you a higher APR.  Or if you already have many outstanding loans, you will likely be offered a higher APR than a loan’s representative rate.


Key points: 

  • APR stands for Annual Percentage Rate and refers to the interest applied to a loan over the period of one year. This represents the cost of borrowing and is the money you will need to pay back, in addition to the sum that you have borrowed. 
  • Some states restrict APR on payday loans, such as Colorado and Montana, both of which cap interest at 36%. 
  • APR on payday loans can sit at around 400%, making these loans an expensive means of funding. 
  • Representative APR and regular APR are different. Representative APR does not necessarily reflect the rates that you will be offered which can explain why you didn’t get the rate advertized for a loan.


What Is APR? 

APR stands for Annual Percentage Rate and tells you the interest that will be applied to your loan if you borrow for 365 days. It represents what you will need to repay your lender on top of what you have borrowed from them. APR is still used to demonstrate the cost of borrowing, even if you are seeking a loan for less than a year. Remember, the lower the APR, the cheaper the loan! 


Why Would I Not Be Offered a Representative APR? 

If you didn’t get the rate advertized For A Loan if could be due to a number of factors, including: 

  • Credit History: When deciding whether to become your lending partner, lenders will usually review your credit history, which reveals your past financial behavior and habits. If you have a history of not paying back debts properly, or taking out multiple loans, you may seem less reliable and therefore be offered higher interest rates than representative ones. You can check your credit score on the FICO website, and see how strong it is. The average US citizen’s credit score is 698. 
  • How Much You Request: If you request a large sum of money, you may be offered higher interest. This is because it is a larger commitment from the lender, and therefore will charge higher rates. This is why you should only request what you need, and keep in mind that the average payday loan in 2021 was $375. 
  • How Long You Are Borrowing For: If you request a short-term loan, say for two weeks, you are likely to be offered a lower APR. This is because the lender’s money will be back in their hands quickly. 


How Do I Find Out A Loan’s APR? 

Lenders in the US must display APR on any advertisements they issue. 

Lenders also display their rates on their websites,. They should provide any relevant information if you contact them. Given this, it is simple to find out and compare rates, allowing you to choose the best loan available to you. 

Alternatively, financial comparison websites often display a side-by-side comparison. They show different loans and lenders so you can see which loans are the most economical for you. 


Do Lenders Advertize Different APRs In Different States?

Yes, each state has individual regulations applied to advertized payday loan APR rates. Some states limit how long and how much you can borrow. Other states, such as Montana, limit how much APR can be applied to loans. This protects their citizens from accruing unmanageable piles of debt. The Consumer Federal Protection Bureau is working towards furthering such regulations to protect Americans. You can find out more about regulations on loans here.


I Think My Lender Charged Too Much Interest, What Should I Do?

If you have a bad feeling about your lender you can do something about it. Particularly, if you think the loan they offered you isn’t quite right. First, you check that the lender is regulated. If regulated, you know they are legitimate and trustworthy.  Why are APRs so high?

To do this, you should check their details on the OLA website or SEC register and this will confirm their current status, and reassure you that they are a good option. Once you’ve done this, you should still take extra precautions, and check their status via the Better Business Bureau website. They are graded between A+ and F, and you are shown justifications for their grade. 

Finally, check online reviews to understand other borrowers’ experiences with particular lenders.  


Will It Make a Difference If I’m Self-Employed?

If you’ve self-employed it’s the same as if you were employed by a company as long as you can show steady income of at least $800/ month. That all changes if you have a bad credit score.  Read our post How Do I Get A Loan If I’m Self-Employed?







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