Get the Facts About Annual Percentage Rates

What Should You Know About APR?
  •  APRs are NOT an Indicator of Cost in a Loan, Rather Lower Cost Loans Generally Have Higher APRs and Vice Versa
  • Nevertheless, Policymakers Will Often Try to Impose APR Caps That Simply Cut Off Borrowers’ Access to Safe, Affordable, State-Regulated Loans
  • ​With a Better Understanding of APRs, We Can Preserve Access to the Lowest Cost, Safest, and Most Affordable Loans

Essential Facts About APRs That Everyone Should Understand!

  • Why There Is a Difference Between APR and Interest Rates
  • How Lenders Determine What APR to Charge Based on Their Company’s Fixed and Variable Costs
  • ​How APRs are Principally an Indicator of the Size and Length of a Loan
  • ​Why APRs Were Established to Compare Loans of Equal Size and Maturity, Not to Set Standards or Compare Loans of Different Sizes and Maturities

How Can Policymakers Foster Safer and Affordable Loans?

  • By Learning How the "Structure of a Loan" Can Mean the Difference Between Paying Off a Loan Completely Over a Set Time Period Versus Slipping Into an Endless Cycle of Debt
  • ​Understanding How "Testing the Ability to Repay" Can Mean the Difference Between a Borrower Getting a Loan They Cannot Afford and Getting One that Fits Within Their Budget
  • ​Understanding Why it is Important for Borrowers to "Take Their Financial Risks Into Consideration" and How Doing so Determines Whether They Will Receive a Loan and What Price They Will Pay

Minority and Low Income Zip Codes Lack Access to Beneficial Forms of Credit.

  • Banks, Despite Federal Requirements, Have Limited Branch Locations in These Zip Codes
  • Payday Lenders, Title Loan, and Pawn Shops Have Come Into These Communities to Fill the Financial Services Void
  • Every Community Deserves Access to Well-Structured Credit that Does Not Place Them in a Cycle of Debt

Don’t Take Our Word For It. Here’s The Fed.

The Federal Reserve Studied the Cost Structure of Consumer Finance Companies and Its Implications for Interest Rates

  • This article examines the relationship of loan amount and break-even annual percentage rates and the implications of this relationship for rates and credit availability.
  • While larger loan amounts have much lower interest rates than smaller amounts, larger loans carry more significant interest payments and a long period of debt. Also, consumers may not qualify for larger loan amounts.
  • If rate ceilings constrain small loan revenue, only large loans will be provided. Consumers who need a small loan or only qualify for a small loan would not be served.

What About Those Opinion Polls?

What Would Happen If We Imposed a $5 Cap on the Price of a Steak?

Sure Sounds Good!

What If We Imposed a $5 Cap on the Price of a Steak?

  • No Restaurant Could Afford to Buy the Meat, Pay the Rent and Utilities and Pay the Staff to Cook, Serve, and Clean
  • A $5 Cap on the Price of a Steak Would NOT Mean Cheap Steak for All. It Would Mean NO Steak
  • People Who Work in Restaurants and on Ranches Would Lose Their Jobs
  • ​In the Same Way, a 36% APR Rate Cap Would Not Lead to Inexpensive Loans. It Would Mean NO Availability of Under $5,000

If You Ask The Question One Way, Leaving Out Critical Information, You'll Get One Answer.

If You Ask The Question Another Way, Including Critical Information, You'll Get Another Answer.

Don't Trust Opinion Polls Where the Question Asked Leaves Out Critical Information!

Don't Take Our Word: Listen to the Experts!

Consultative Group to Assist the Poor

“Interest rate ceilings hurt poor people by making it harder for them to get credit. Making many small loans costs more than making a few large ones. Interest rate ceilings prevent microfinance institutions from covering their costs, and thereby choke off the supply of credit for poor people.” 

Financial Health Network

"Much of the debate about small-dollar credit has heretofore focused on price, as expressed in Annual Percentage Rates (APR), as a primary determinant of quality. While affordable prices are certainly one aspect of high-quality small-dollar loans, what is “affordable” to any given borrower depends on many factors, including the loan’s size, repayment period, interest rate and fees, as well as the individual borrower’s unique financial situation….” 

Pew Charitable Trusts

“In general, smaller loans have higher APRs…. One reason for this….is that APRs are annualized, so they tend to be higher for loans with shorter terms. Another reason is that lenders’ operating costs, which are charged to borrowers, are largely constant across all loans, so they are higher on a per-dollar- loaned basis for small loans than for large ones.” 

Consumers' Research

“...the proposed rate cap would likely eliminate the installment lending market, as well. Installment loans, which have average annual interest rates of 40 to 90 percent, represent the closest alternative to payday loans. They are used by an estimated 10 million consumers each year.” 


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