APR is Annual Percentage Rate and it is the cost you pay for borrowing money. APR is calculated on the full amount of the loan over the period of one year. By knowing the APR, you will be able to work out how much interest there is on the loan and how much you will be repaying. If you can compare APR rates, you may be able to secure a more affordable loan when you need to borrow money for the short term.

**APR and Short Term Loans**

APR percentages are advertised by lenders, so you can compare similar loans. It represents the annual rate for borrowing money, including transaction fees. It does not cover any compounding interest. When taking out a loan, you may find that the APR is fixed or variable. Variable can make it very unpredictable, as it varies from one month to the next, which affects how much you repay.

Most short term loans come with fixed APR, so you can budget accordingly without any unexpected surprises.

**How Do They Calculate APR?**

When it comes to calculating APR there are a number of factors, which includes the loan amount, the time over which the loan is repaid and any late payments. This is all added to the final loan amount.

**How Do They Work Out Monthly APR?**

It’s easy to understand that APR is an annual rate, but with short term loans, you often borrow money for a shorter period of time, a few months. APR is added to the amount owed each month, so calculating it, you will need to take the APR, divide that by twelve and then times it by the number of months you intend to repay the loan.

**How to Calculate the Interest on a Short Term Loan**

When it comes to taking out a short term loan, you will be told the APR and interest charged, along with a final payable amount. This can assist you in seeing how much the overall interest is and how much the loan will cost you in the long run. Always read through the loan agreement to identify the interest rate and type that will be applied to the loan. You can multiply the interest rate by the principal balance, dividing it by one hundred to find the interest charged over that period.

**How to Calculate the APR on a Short Term Loan**

Most lenders will publish their APR rates on their website, making it easier to see what the APR is that you can expect if you apply for a short term loan through them. They also offer detailed breakdowns of the repayment schedule, including repayment dates, amount borrowed and interest repayment amounts.

You can calculate the APR by multiplying the periodic interest rate by the periods in one year. In order to do this, you take the APR, which is equal to the Principal Fees plus Interest, times that by 365 days (one year) and then times that by 100. The interest is the amount payable over the period of the loan. The principal is the loan amount and that is then divided by the number of days of the loan.

The easiest way to calculate APR is:

- Calculate the interest rate
- Add any admin fees to the interest amount
- Divide by the loan amount
- Divide that by the number of days of the loan, so a four month loan would be 113 days, for example
- Times that by a year (365 days)
- Times than by 100 to convert the amount to a percentage.

**In Summary**

The APR is the annual percentage rate you can expect to pay on any short term loan you apply for, it provides you with insight into how much interest you will be paying over the period of the loan. Always ensure you read the loan agreement in detail, as the APR, while it remains the same, different lenders also include other fees to your final balance. Always be aware of what is included in the APR amount before signing on the dotted line.

LEGAL INFORMATION

**Rates from 12.9% APR to 1721% APR. The minimum Loan Term is 3 months. The maximum Loan Term is 36 months. **

**Representative Example: £1,000 borrowed for 18 months. Repayment of 17 Months at £87.22 and final repayment of £87.70 The total amount repayable is £1570.44. Interest amounts to £570.44, an annual interest rate of 59.97% Representative APR: 79.5% (variable)**

*Subject to application being approved by the lender. Not all lenders are able to provide up to £5000

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