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APR on Payday Loans

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    APR on Payday Loans

    I have been racking my brain and using the internet to find a way of calculating Typical APR on a Payday Loan. I work in the industry and I know for a fact that the industry approved calculator released by the lending industry gives a very different result to the pages of supposed APR help availabel for Excel.

    WHat i want to know is how do i get a result of 734.2% APR when the amount borrowed is £350, the amount repaid is £405.97 and the face rate is 15.99% (which is an actual interest rate of 19.03% or an effective annual rate of 228.40%) and finally the term is 30 days

    The formulae i have seen are something like the following:

    =EXP(LN(405.97/350)*365/30)-1

    or using =RATE in combination with a bunch of different factors (N, PMT, PV, FV)

    Nor does this work which was suggested by someone:

    =((1.1599^12)-1)*100

    Can ANYONE shed some light on this. I know the answer, I just want to figure out the calculation

    Many, many thanks

    Midds

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    Forum Guru shg's Avatar
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    Re: APR on Payday Loans

    Your last formula is correct, except for multiplying by 100, which is not necessary (format the result as %). The annualized rate is 493%.
    Entia non sunt multiplicanda sine necessitate

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    Re: APR on Payday Loans

    Except it is not correct, the APR as dictated by the governing body is 734.2% APR...

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    Re: APR on Payday Loans

    Have you heard this news about increasing rate of people who are taking loans. A lot of us have personal reasons why we are getting this kind of loan. When we talk about personal loan, this is a loan granted for personal, family, or household use, as distinguished from a loan financing a business One source of extra cash in desperate times is to take a loan from one's own 401(k) account. The amount of individuals choosing to use their 401(k) accounts for loans is reaching a record high. People are not being stopped by the truth that most economic experts would most likely prefer they didn't take money out of their retirement accounts. Some members of Congress are attempting to limit the amount of times an individual can borrow out of their retirement cash. Itís a good thing payday loans will always be accessible for those who may surpass their limit.

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