APR Explained

Most people will know what the term APR is short for - Annual Percentage Rate (of charge), and undoubtedly many people will look at our representative APR figure of 1436% and panic at such a high figure.

The key to understanding why the APR is so high for short term loans is to look at the first word in APR - "Annual". Our loans are intended to be repaid within 30 days so why would we even quote the rate for borrowing for a whole year?  The simple answer is, it’s the law.  In advertisements, all lenders must quote the APR rate at or below which loans are provided to at least 51% of their customers.

The APR must include all charges associated with the loan and of course the interest rate. The APR calculation is intended for consumers to be able to compare the cost of borrowing across widely different forms of lending - Credit Cards, Loans, Hire Purchase Agreements, etc - and for these products the APR is better suited since borrowing is usually over a much longer term.

One of the best ways to understand how ill-fitted the APR can be is to apply it to other industries.  For example, imagine calling your local taxi company for a price to book a small journey across town lasting 30 minutes, and the ensuing confusion if they were compelled by law to give you the price for booking the taxi for a whole year?