Misunderstood APR

Reader comment on: Refund Anticipation Loans
in response to reader comment: That is a penalty there is also interest charged.

Submitted by Joe S (United States), Feb 9, 2011 10:40

Lyle, possibly you are missing the essence of the analogy. The Truth In Lending Act (TILA) requires the APR calculation to impute a rate for loans under 1 year in duration as if the customer were paying (in the case of RALs - 12 day repayment period) the simple interest rate "30.4" times within the year (30.4 12 day periods in a year) - when "in fact" the customer pays the simple interest rate one, and only one time. Why confuse customers with APRs that don't make sense for short term loans under a year? In short, nobody is paying $1,935.91 to borrow $1561.22 as 124%APR leads many people to believe ... Consumer Groups have gotten a lot of traction out of triple digit APRs on short term loans because, for the same reason, most people - even in Congress - don't understand them.


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Title By Date
That is a penalty there is also interest charged. [81 words]LyleFeb 8, 2011 14:08
⇒ Misunderstood APR [144 words]Joe SFeb 9, 2011 10:40

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