Question

A particular payday loan company offers​ quick, short-term loans using the​ borrower's future paychecks as collateral. The loan company charges $16 for each $140 loaned for a term of 17 days. Find the APR charged by the payday loan company.

Answer 1

360/17=21.2
140/16=8.75
21.2*8.75=185.5%

Answer 2

APR is annual percentage rate(percent amount of total loan equal to the annual charge). The APR charged by the specified company is 245.38%

What is APR?

Suppose there is initial amount as P.

The interest, or say charge on it is applied annually as 'C' amount.

Taking how much percent of P is C, we get:

$APR = \dfrac{C}{P} \times 100$

For the given case, the charge by company is $16 for each $140 for a term of 17 days.

Thus, for 365 days(a year), the amount of charge is:

$\dfrac{365}{17} \times 16 \approx 343.53$

Thus, annually, on $140, there will be charge of $343.53 approx.

Thus, APR is calculated as:

$APR = \dfrac{343.53}{140} \times 100 = 245.38 \%$

Thus, 245.38% approx of the original amount will be charged.

Thus,

The APR charged by the specified company is 245.38%

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