Cost Of A 46.96% APR Loan

Cost Of A 46.96% APR Loan

Written by Lisa Rennie
Fact-checked by Caitlin Wood
Last Updated July 7, 2022

When you take out a loan, you’ll be charged interest on the loan amount. The higher the rate, the more you’ll have to pay in total interest over the life of the loan, which is why it should be your goal to secure the lowest rate possible.

There are some loans that come with exceptionally high interest rates. More specifically, a 46.96% rate may be more commonly offered on short-term personal loans to borrowers with less-than-perfect credit. 

That said, it’s important to differentiate between the APR and the AIR, which are slightly different, even though they both represent the cost of a loan. 

Let’s take a closer look at how much a 46.96% APR loan can cost you versus a 46.96% AIR loan? 

What Is An AIR?

The AIR — or Annual Interest Rate — is the average percent interest you pay every year on a loan. It’s calculated by dividing the total interest paid on the loan by the loan amount and number of years of the loan term. 

For instance, let’s say you take out a $5000 loan for 1 year, and your total interest amounts to $600 You would calculate your AIR as follows:

$600 ÷ ($5000 ÷ 1) = 12%

That means your AIR on this loan is 12%. So, a $5000 loan at a rate of 12% would mean your annual interest expense would be $600. It should be noted, however, that the AIR doesn’t consider any fees or early loan repayments. 

What Is An APR?

The APR — or Annual Percentage Rate — is a more effective rate to help you understand all costs associated with a loan and when comparing different loans. In addition to the interest expense of a loan, the APR also includes all fees and other costs that come with securing the loan, such as closing costs, broker fees, and loan origination fees

Using the same example as above, let’s now add other fees to the overall loan cost. Let’s say all these fees amounted to $300. With the added fees to the total loan cost, your APR for the loan would be calculated as follows: 

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

[(300+600) ÷ (5000) ÷ (365) x 365] x 100 = 18%

Comparing different loans and lenders using the APR instead of the AIR is more helpful, as it gives you an idea of the exact amount that you would have to pay when all other fees are factored in. 


In most cases, the APR will be higher than the AIR because of the other fees involved. The APR provides a more accurate depiction of the overall cost of a loan. The cost of borrowing is higher than just the interest charges. 

Cost Of 46.96% Apr Loan Vs. 46.96% Interest Rate Loans

Depending on the lender, the loan type you’re applying for, and your financial and credit profile, your interest rate can vary quite a bit. While it’s possible to secure loans with rates as low as 3%, some lenders can charge upwards of 46.96%. 

But how would the cost of a 46.96% APR loan differ from a 46.96% interest rate loan?

The following table illustrates how the two differ:

46.96% APR Loan46.96% Interest Rate Loan
Loan Amount$10,000$10,000
Interest Rate46.96% APR46.96% AIR
FeesNone (already Included in APR)$500 (loan origination: 5% of loan)
Term3 years3 years
Monthly Payment$522.54$548.67
Total Paid$18,811.41$19,751.87
Total Interest + Fees$8,811.41$9,751.87

In this case, the AIR for the interest rate loan is higher, as the fees are not included in the interest rate. Instead, they’re added to the total loan amount along with the 46.96% interest rate. When comparing the APR of both loans you’ll see that the 46.96% AIR loan increases to 51.22% due to the added fees. This is why it’s best to compare loans according to their APR as the fees can drastically change the cost of a loan. 

What Costs Can Be Included In The APR?

The APR can include a variety of fees, including the following:

  • Interest rate. The rate your lender charges you makes up the bulk of the APR. 
  • Loan origination fee. This fee is charged by lenders to process new loan applications.
  • Underwriting fee. This is a payment made at closing and is charged by the lender to cover administrative costs and to make money from your loan. 
  • Prepaid interest. These charges are due at loan closing for any daily interest accrued on your loan from the time your loan closes to the time frame covered by your first loan payment. 
  • Mortgage default insurance. If you’re taking out a mortgage and make a down payment of less than 20% of the purchase price of the home, you’ll be required to pay mortgage default insurance. While this fee can be paid upfront, many borrowers choose to roll it into their mortgages. 
  • Discount points. If you choose to “buy down” your interest rate, you’ll have to pay these costs at closing. 

How To Calculate APR

Calculating the APR requires the following figures:

  • Amount borrowed
  • Total finance charge (including total interest paid + fees)
  • Term length (in days)

Using these numbers, calculate the APR using the following formula: 

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

For instance, let’s say you’re borrowing $50,000 for 1 year, with $3,000 in total financing charges. The calculation for the APR in this scenario would be as follows:

$3,000 ÷ $50,000 ÷ 365 x 365 x 100

= 6% APR

For this particular loan, you’d have an APR of 6%.

Is A 46.96% APR A Good Rate?

Whether or not a 46.96% APR is good depends on the type of loan you’re applying for. If you have bad credit and are applying for a short-term loan, then a 46.96% APR might be reasonable and expected. 

However, if you have good credit, you shouldn’t pay anywhere near that amount. Here are a few loan types and their average interest rates, according to today’s standards.

  • Mortgages: 3% – 4%
  • Auto loans: 4% – 10%  
  • Student loans: 3% – 5%
  • Credit cards: 18% – 23%

46.96% Loan FAQs

What’s the maximum APR a lender can charge? 

According to Section 347 of the Criminal Code of Canada, the maximum annualized interest rate that can be charged is 60%. Lenders who charge anything over this rate are considered to be committing a criminal offense.  The exception to this law is payday loans. Section 347.1 was added to the Criminal Code in 2007 that exempted payday loans. Instead, each province serves as the authority over payday loans.

Is a 46.96% APR good?

As mentioned, a 46.96% APR is not good for mortgages, auto loans, student loans, or credit cards. However, it may be fair for borrowers with bad credit looking to take out a short-term personal loan or payday loan. 

How do I get a lower APR? 

To lower your rate, you need to make sure credit and financial health are both high. This means working toward improving your credit scores, lowering your debt levels, and making sure you make all your payments on time. 

Final Thoughts

When comparing interest rates on loans, it’s important to look specifically at the interest rates. However, you’ll also want to differentiate between an APR and AIR, as they both may depict different overall costs of your loan. Make sure you carefully review all costs associated with your loan before you apply.

Rating of 5/5 based on 1 vote.

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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