APR is the annual percentage rate of interest applied to any type of loan. APR is not unique to short term loans. It is common for all types of loans, be it secured and unsecured. It is no secret that unsecured loans have a much higher annual percentage rate of interest compared to secured loans. Any loan that has some accompanying collateral such as property or monetary investment will be easily recouped. Hence, the risk is significantly reduced for the lender and that allows it to be more lenient with the interest charged. Such generosity is not expected from lenders of unsecured short term loans. However, there is a difference between the annual percentage rate being higher and being exorbitantly high.
The Spectrum of APR
If you have enough exposure to loans, then you will know that an annual percentage rate can be as low as 3%. It may be lower in some exceptional cases. But these are obviously for secured loans and also in some instances when the purpose of the loan is well defined. If you are procuring an asset, such as a house, then the money is being used for something that can be monetized later. If you are simply spending the money you are borrowing, then there is little to recoup. There is no surety or safety net. This is the fundamental reason why home loans have much lower rates of interest compared to unsecured short term loans. Even car loans don’t have as low an interest as mortgage because a house is not exactly a depreciating asset like a car. House prices tend to undergo appreciation as against the depreciation of a car.
The spectrum of APR is vast as you move from secured loans to unsecured short term loans. There are lenders that can charge more than 100% and some charge more than 300% as an annual percentage rate. Now, these rates do not actually imply you would be paying thrice the amount you borrow as the unsecured short term loans in such cases usually get repaid in three to six installments. The more installments you opt for, the more interest you shall pay and there will be a time when the principal loan amount or the money borrowed will equal the interest you pay. Thereon, the interest paid will exceed the loan amount, not uncommon in case of unsecured short term loans with two year or longer repayment period.
Research and Compare APR
The only way you can get the best unsecured short term loans is by knowing the spectrum of APR that is in the offing right now. You must research and compare the various annual percentage rates available in the market. Talking to one lender or even five may not be of much help. You should use a medium like Cash Carrot wherein you can get access to almost all major lenders and get to know their propositions. Only an informed decision will be wise and worthwhile. Do not presume an APR is the best you can get unless you have scanned the entire spectrum.