Borrowing costs extra
When you borrow money, you pay back more than you borrowed. The extra is the cost of the loan.
The extra you pay is called InterestThe price of borrowing money. You pay interest when you borrow, and you can earn interest when you save.More in the glossary, and sometimes there are fees, too. The APRAnnual percentage rate. The yearly cost of borrowing money, including interest and some fees, shown as a percent.More in the glossary shows the yearly cost as a percent. A lower APR means a cheaper loan.
Some loans cost much more than others:
- A credit union “payday alternative loan” can’t have an APR over 28%.
- A Payday loanA small, short-term loan that's usually due on your next payday. The fees are very high compared to other loans.More in the glossary that charges $15 for every $100 works out to about 391% APR.
Before you borrow, ask: “What’s the APR, and what’s the total I’ll pay back?”