Interest rates are everywhere. Just turn on the TV, pick up a newspaper or walk past a High Street bank and you’ll see a huge range of percentages being bandied about, whether it is mortgages at 4 per cent, car loans at 8 per cent or credit cards at 19 per cent.
There’s much made of the fact that interest rates are at an all-time low and have been at very low levels for some time now. So when something rather higher appears, it catches people’s eye. Like the APR (annual percentage rate) for a payday loan.
If you’re used to thinking in terms of 4-19 per cent, seeing 1,700 per cent, 2,500 per cent or even 4,000 per cent can come as a bit of a shock. But it’s a misleading figure and not a realistic way of comparing the cost of different types of loans.
APR stands for Annual Percentage Rate and it is the interest payable on the amount borrowed and other charges expressed as an annual rate charge.