Cost Of A 29.99% APR Loan

Cost Of A 29.99% APR Loan

Written by Lisa Rennie
Fact-checked by Caitlin Wood
Last Updated May 6, 2022

A loan can come in handy when you’re a little low on cash but have a pressing expense to cover. But when you take out a loan, not only are you required to pay back the loan amount but interest and fees, too. The higher the rate you’re charged and whether you pay your fees upfront or as part of the loan, can affect the cost of your loan. 

A common interest rate charged by lenders is 29.99%, but whether this is the AIR or the APR can have significant effects on the cost of your loan. Understanding the difference between the two is important, as they’re slightly different and will influence the overall cost of a loan. 

Let’s dig in a little deeper into how much a 29.99% APR loan can cost you, and how APRs and AIRs compare with one another.

29.99% APR Vs 29.99% AIR 

If one lender quotes you a 29.99% APR and another quotes you a 29.99% AIR, would you understand the difference? One rate accounts for all finance fees, while the other excludes such fees, and would later add them to the loan costs. 

What Is An Air? 

The Annual Interest Rate (AIR) is the interest paid annually on a loan and is expressed as a percentage. It only accounts for the interest paid for borrowing, it does not include any fees or related costs. 

To calculate the AIR on a loan, you need to divide the total interest by the loan amount and length (in years) of the loan term. To illustrate, let’s say you apply for a $40,000 loan for 1 year with interest totalling $5,000. The AIR calculation would be as follows:

$5,000 ÷ ($40,000 ÷ 1) = 12.5%

In this case, the AIR on your loan would be 12.5%. That means a $40,000 loan with a 12.5% interest rate would cost you $5,000 per year in interest. It’s important to note that the AIR does not factor in any additional fees. 

What Is An APR?

The Annual Percentage Rate (APR) provides a better idea of the total cost of a loan because it factors in all other fees associated, such as broker fees, loan origination fees, closing costs, and discount points. When comparing different loans, it’s more helpful to compare using the APR rather than the AIR. 

Using the same figures as above, let’s illustrate how to calculate the APR on a loan. 

If all the additional costs mentioned above total $3,000, that amount would be added to the loan amount. In this case, the loan would increase from $40,000 to $43,000. 

How To Calculate An APR

You can calculate the APR as follows:

[(Fees + Interest) ÷ (Principal) (# of Days in Term) x 365] x 100

  • Take the total interest paid + fees and divide it by the loan amount.
  • Multiply the result by the loan term length (in days). 
  • Divide the result by the loan term length (in days). 
  • Multiply the result by 100.

To illustrate, let’s use a $40,000, 1-year loan with $3,000(fees) + $5,000(interest) in total financing charges. The calculation for the APR in this scenario would be as follows:

$8,000 ÷ $40,000 x 365 ÷ 365 x 100 = 20% APR

AIR Vs. APR

For the most part, the APR is typically higher than the AIR because of the other fees that must be paid. As such, you’ll get a more accurate idea of the total cost of a loan with the APR, since the cost of borrowing involves more than just interest costs. 

Cost Of 29.99% APR Loans Vs 29.99% AIR Loans 

The interest rate on your loan can vary depending on a few factors, including your credit health, your income level, debt level, and other financial factors. The goal is to secure the lowest rate possible to keep loan costs low. However, it’s not uncommon for borrowers to pay upwards of 29.99% interest on a loan. Though legally a lender cannot charge interest rates above 60% (with the exception of payday lenders). 

The question is, how does a 29.99% APR loan differ from a 29.99% annual interest rate loan?

Refer to the following table for comparison purposes:

29.99% APR Loan29.99% AIR Loan
Loan Amount$10,000$10,000
Interest Rate29.99% APR29.99% AIR
FeesNone (already Included in APR)Loan Origination: 5% of loan
APR29.99%34.014%
Term3 years3 years
Monthly Payment$424.46$424.46
Total Payments$15,280.60$15,280.60
Total Interest$5,280.60$5,280.60
Total Interest + Fees$5,280.60$5,780.60

As you can see from the chart above, the AIR for the loan is higher because the fees are not included in the interest rate. Instead, they are added to the 29.99% interest rate. Conversely, the APR loan includes all costs of the loan at 29.99%.

What Types Of Costs Can Be Included In The APR?

The costs that may be included in an APR depend on the type of loan you take. Fees on personal loans will generally differ compared to car loans and mortgages. The following fees may be included in the APR:

  • Interest rate. The biggest chunk of your APR is the interest rate itself, which is what your lender charges you for the loan. 
  • Loan origination fees. This is a fee charged by the lender to process new loan applications and can either be paid upfront or rolled into the loan amount. 
  • Underwriting fees. This is a closing cost made to the lender to cover overhead and administrative costs. 
  • Prepaid interest. These charges are due on closing day and cover any accrued daily interest on the loan from the closing date to the first loan payment.
  • Mortgage default insurance. If you’re applying for a mortgage and pay less than a 20% down payment towards the loan, you’ll need to pay mortgage default insurance premiums on top of your loan payments. Borrowers can either pay this upfront or roll it into their mortgage, both of which will affect the cost of their mortgage.
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Is A 29.99% Apr Good?

A 29.99% APR may or may not be good depending on the loan type you’re applying for and whether your finances and credit are in good shape. In general, a 29.99% APR is a common rate for personal loans for people with bad credit. You may also get this rate for bad credit card loans. 

Here are a few different types of loan and credit products and their average interest rate ranges:

  • Personal Loans: 3% – 46.96%
  • Car loans: 4% – 46.96%  
  • Mortgages: 3% – 4%
  • Credit cards: 18% – 23%
  • Payday loans: 390% to 780%

Based on the above example, a 29.99% APR may be far too high for a mortgage, but may be very competitive for a bad credit car loan or personal loan. 

29.99% APR Loan FAQs

What’s the maximum APR a lender can charge? 

Lenders must comply with Section 347 of the Criminal Code of Canada, which stipulates how much they can charge in interest for loans. According to the Code, the maximum rate lenders can charge is 60%.  However, Section 347.1 was added to the Criminal Code not long ago that excused payday loans, which are now regulated by each individual province. 

Is a 29.99% APR good?

As noted earlier, a 29.99% APR may be good for bad credit borrowers who take out short-term loans, but may not be good for consumers with decent credit who are applying for a mortgage, or credit card. 

How do I secure a lower APR? 

To get a lower interest rate, make sure your credit is healthy. If not, take some time to give it a boost by making all bill payments on time and lowering your debt-to-credit ratio. Increasing your income and lowering your overall debt, can also help you secure a lower APR. The better your overall financial health looks, the better chances you’ll have of securing a low rate. 

Final Thoughts

Comparing interest rates between different loans and lenders is important to make sure you’re getting the most affordable loan product. For this reason, it’s important to understand whether the rate you’re looking at is either an APR or AIR, as they both may factor in different total costs of the loan. Review all costs of your loan carefully before you sign the loan agreement.

Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.

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