You may see the term APR interest and wonder, “what is it?”
APR stands for Annual Percentage Rate, also known as the interest rate you pay for a loan for the entire year. The APR is applied to a loan, credit card, mortgage or even a collateral loan.
The APR exists so that consumers can compare the cost of a loan or even lenders.
Nominal APR vs Effective APR
You might also see two popular finance terms in researching loans: the nominal APR and the effective APR. The nominal APR is the simple-interest rate for a year, while the effective APR is the fee, plus compound interest rate, calculated across a year.
What is the formula for nominal APR?
The nominal APR is computed as the rate for a payment period, added by the number of payment periods in a year. The legal definition of ‘effective APR’ can vary by where you live or by jurisdiction.
Credit card companies are allowed to advertise interest rates on a monthly basis but are required to publicly state the APR to customers, according to Investopedia. Credit card providers can list their APR on a monthly basis as long as the entire 12-month APR is listed in another place where the agreement is signed.
Collateral Loans at Provident Loan Society
Provident Loan Society and most other pawn shops don’t have an APR because consumers can’t borrow for an entire year. Most pawnshops only lend money for 4 months. Provident Loan Society has a longer repayment period of six months.
So how do you determine what your interest rate, fees, and charges will be for a loan at Provident Loan Society?
The not-for-profit lending organization has created a Fast Cash Calculator that allows consumers to learn instantly how much their loan will cost. Borrowers need to fill in the amount they want to borrow and how long of a loan they need. The calculator will give you the interest rate, fees and total cost for your loan.
Provident Loan Society is a not-for-profit lending organization that was founded in 1894. If you want more information for a loan, you can go to their FAQ page.
About the Author
Charlotte Knobben studies journalism in The Netherlands and currently lives in New York City.