Cash Genie Explains High APR for Short-term Loans
Added: (Wed Nov 11 2009)
Pressbox (Press Release) -
There is no hiding the fact that the APR (annual percentage rate) for all short-term and payday loans is enormous, reaching as high as 3000%. It is understandable to query any large number like this, especially when it comes to borrowing. Cash Genie, the short term loan lender explains the high APR, and the benefits of paying this interest when taking out an instant cash advance.
The APR is an Annual percentage measure for a loan, which for a short-term loan lender is bad news when it is law to display the APR for all financial lending services. This law has been passed to make it clear and transparent for consumers to compare all financial lenders. Because short term loans are only normally for a few days or weeks, the charges apply for this amount of time. The APR calculates these charges on an annual basis; the calculation will therefore annualise these fees to make it easier for customers to compare financial loans.
APR was primarily designed for comparing like-for-like financial products, such as traditional loans of several years or ongoing credit card balances. It can still be a valid and an important measure to consider with any credit, but it certainly was not devised with short term loans in mind. In the case of loans for a few days or weeks, it’s not a straightforward representation of the interest actually charged.
In the case of Cash Genie’s service, the result of annualisation is a typical APR that would be astronomical for a traditional loan taken over 1 year, but our cash advances are only for between 1 day and a month. With such short term credit, APR has the potential to confuse, because it creates incomprehensible numbers compared to the average value. That is why Cash Genie show the total amount repayable (TAR) before customers apply, this is represented by the slider on http://www.cashgenie.co.uk. By being completely transparent, customers can easily decide what’s affordable and worth paying for the specific cash advance you need.
To simplify things, Cash Genie (the short-term loan provider) charge 30 pence in every pound borrowed for each loan, therefore a £75 loan will incur interest charges of £22.50 to pay back at the end of the month.
To draw a comparison, a short term loan is similar to treating yourself to go and watch your favourite band/group play. A single concert ticket could cost £100 for a gig lasting 90 minutes. However, to annualise this, your ticket would cost £584,000 or 5840% APR. If a concert ticket was offered at 5840% APR then this would seem astronomical, though because it is only a one off payment and in the short term £100 for a 90 minute concert seems fine. All charges shown are based on multiplying a typical outlay for a concert ticket by 365 days. It is actually more forgiving than using the APR calculation, but it shows how the cost of a short term service can sound excessive when annualised! Cash Genie loans are obviously only borrowed and paid pack within one month and not for 365 days.
Cash Genie adopt a responsible lending policy, meaning the company offers a transparent service with all charges shown upfront. APR has the potential to confuse, because it creates incoherent numbers compared to short term cash advances. Cash Genie shows the total amount repayable (TAR) upfront before customers apply. By being completely transparent, customers can easily decide what is affordable and whether the short term loan is worth paying for.
Loans in the short term are advised to be used for emergency purposes. Cash Genie offers a transparent service that is convenient, fast and secure. Customers do not use the service on a regular basis but on some occasions cash is needed in an emergency. When these instances occur, Cash Genie offer a solution to meet these customer needs in the short term.