## Overview

The Annual Percentage Rate (APR) is a measure of the interest rate plus any additional fees incurred over the term of a loan. It’s a more accurate measure of funds owed than simply an interest rate and is expressed as a percentage of the principal that you’ll pay each year. The Annual Percentage Yield (APY) is similar to the APR except that it measures the amount of money earned in an investment, instead of the interest rate paid on a loan.

The Truth in Lending ACT (TILA) of 1968 mandates that lenders disclose the APR they charge to borrowers. It’s important to find lenders who will be clear and transparent about the APR they offer on their loans. In this way, you will avoid any unwanted surprises. Crediteck connects prospective borrowers with a network of responsible and reputable lenders across Canada. Apply online now.

## How Do You Calculate APR?

First, determine the interest rate for each period over the term of a loan. Then multiply the periodic interest rate by 365 to find the annual rate and convert it to a percentage by multiplying the rate by 100.

Here is the exact formula to calculate APR:

**APR = ((Interest charges + fees) / Principal / n x 365) x 100**

For example, let’s say you took out a $1,000 loan and have 120 days to repay it. Let’s say you’re paying $100 in interest plus $50 in fees.

Add the total amount of interest and fees: $100 + $50 = $150.

Divide by the principal: $150 / $1,000 = 0.15.

Divide by the total number of days in the loan term: 0.15 / 120 = 0.00075.

Multiply by 365 to find the annual rate: 0.00075 x 365 = 0.27375.

Multiple by 100 to convert the annual rate into a percentage: 0.27375 x 100 = 27.375%.

You can use this formula to compare different loan terms by different lenders. This will enable you to see which loans are more affordable.

## What Is a Good APR?

What might be considered a “good” APR will depend on several factors, such as the rates being offered by competitors, the key interest rate set by the central bank, and your credit score. When the key interest rate is low, some lenders may offer a lower APR. However, in some cases, these rates may revert to a higher APR after a certain period of time. What APR is best for you will depend on your unique financial situation. Generally speaking, the lower the APR, the more affordable the loan, and the easier it is to pay it back.

## The Maximum Cost of a Payday Loan by Province

The APR will determine the cost of a payday loan. The terms of a payday loan will differ by province. Different provinces have different regulations regarding payday lending fees and penalties. Below, you will find the maximum cost of borrowing for a $100 payday loan by province.

## Alberta

The maximum cost of borrowing for a $100 payday loan is $15. You are given a cooling-off period of two business days to cancel the loan. The maximum penalty for a returned cheque or pre-authorized debt is $25.

## British Columbia

The maximum cost of borrowing for a $100 payday loan is $15. You are given a cooling-off period of two business days to cancel the loan. The maximum penalty for a returned cheque or pre-authorized debt is $20.

## Manitoba

The maximum cost of borrowing for a $100 payday loan is $17. You are given a cooling-off period of 48 hours to cancel the loan. The maximum penalty for a returned cheque or pre-authorized debt is $20.

## New Brunswick

The maximum cost of borrowing for a $100 payday loan is $15. You are given a cooling-off period of 48 hours to cancel the loan, excluding Sundays and holidays. The maximum penalty for a returned cheque or pre-authorized debt is $20.

## Newfoundland and Labrador

The maximum cost of borrowing for a $100 payday loan is $14. You are given a cooling-off period of two business days to cancel the loan. The maximum penalty for a returned cheque or pre-authorized debt is $20.

## Nova Scotia

The maximum cost of borrowing for a $100 payday loan is $17. You are given until the next business day or, in the case of online payday loans, two days to cancel a loan. The maximum penalty for a returned cheque or pre-authorized debt is $40.

## Ontario

The maximum cost of borrowing for a $100 payday loan is $15. You are given a cooling-off period of two business days to cancel the loan. The maximum penalty for a returned cheque or pre-authorized debt is $25.

## Prince Edward Island

The maximum cost of borrowing for a $100 payday loan is $15. You are given a cooling-off period of two business days to cancel the loan. There is no maximum penalty for a returned cheque or pre-authorized debit.

## Saskatchewan

The maximum cost of borrowing for a $100 payday loan is $17. You are given a cooling-off period of two business days to cancel the loan. The maximum penalty for a returned cheque or pre-authorized debt is $25.

## Things to Keep in Mind

The APR on your loan will have an impact on how affordable the loan may be to you. Before you take out any loan, make sure you know the APR. This will help you determine whether the loan is worth taking out.

The lender or creditor determines the APR on any given loan. Your credit score can impact the rates you’re offered. A good credit score would tend to indicate that you are a low-risk borrower, so you may receive a lower interest rate on your loan. That, in turn, will lead to a lower APR. By contrast, a poor credit score will convey that you are a high-risk borrower, which may result in a higher interest rate on your loan.

If you feel you are unable to repay your loan due to a high APR, it may be worth looking at alternative options, such as family loans. If you’re saddled with debt, debt consolidation could be one way to go, as it may result in a lower overall interest rate and smaller monthly payments.

## In Summary

The APR is used to calculate the cost of a loan. It allows you to see how much you’re paying in a certain period of time as a percentage of the principal amount. If you wish to know how much your loan is going to cost, the APR will give you an accurate picture. Low on cash? Crediteck will connect you only with lenders who are reputable and transparent about their APR and loan terms. Apply now.