Yep, we know. It’s huge. But there’s a simple reason for this and we’re more than happy to explain... Much like traditional lenders, we could use fixed fees, long term products and small print to dramatically shrink our annual percentage rate (APR). Yet the beauty of our short term service is its unique flexibility and complete transparency - and that's something we won't compromise just to appear more conventional.

Confusing

If you're sceptical about the potential for APR to confuse when applied to very short term loans, check out this simple cartoon. It illustrates what might happen if some of life's other short term services gave you an annualised rate of charge. All of the costs shown are based on multiplying a typical outlay for these services by 365 days. That's actually far more forgiving than using the APR calculation, but it shows how the cost of any short term service can sound astronomical when annualised!

Important facts about APR

APR stands for the Annual Percentage Rate of charge and 'typical APR' is the rate that applies to at least 66% of successful applicants to the loan product in question. The term describes the rate of charge for a whole year and expresses interest and other fees as an annual rate.

Our beautiful union of short term cash and flexibility makes for a rather unsightly APR figure! This is because it's an annualised measure that wasn't designed with short term loans in mind. The APR equation takes a typical Wonga cash advance of less than a month and not only multiplies, but also compounds the interest many times over!  

It's understandable to question any crazy number like this, especially when it comes to borrowing. But it's our unconventional and consumer-friendly approach to lending, combined with the mismatched annual nature of APR, that makes it so mind-bogglingly big. If you don't believe us, just check out the calculation we need to make.

Another APR myth busted

The larger the APR the more expensive a loan, right? Wrong. It’s a common perception, but with Wonga’s super-flexible approach to short term credit the opposite applies. This is a good indication of the potential for APR to mislead when trying to judge the cost of a short term loan.

The cost of a Wonga cash advance is determined by the amount of money borrowed and the number of days you need it for - the shorter the term, the less you’ll pay in interest and fees. Yet APR actually increases as the term and cost of a Wonga loan decreases. Confused? Well, as the loan period gets shorter, the more times you have to multiply and compound interest to make it into a theoretical annual figure!

Apples and pears

APR was primarily designed for comparing like-for-like financial products, such as traditional loans of several years or ongoing credit card balances. It can still be a valid and important measure to consider with any credit, but it certainly wasn't devised with short term loans in mind. In the case of loans of a few days or weeks, it's not a straightforward representation of the interest actually charged.

In the case of Wonga's service, the result of annualisation is a typical APR that would be 'extraterrestrial' for a traditional loan taken over several years, but our cash advances are only for between one day and a month. With such short term credit APR has the potential to confuse, because it creates incomprehensible numbers compared to the norm. That’s why we also show the total amount repayable (TAR) before you apply. By being completely transparrent, you can easily decide what's affordable and worth paying for the specific cash advance you need.

Understanding how much a loan will cost to repay 

Much like a black cab, we offer a secure service that’s fast, convenient and transparent. You probably wouldn’t use one to get around every day, as there are cheaper ways to get from A to B, but on some occasions the slower or less reliable alternatives just won't do. In similar circumstances Wonga can help you solve a short term cash flow problem without requiring long term debt. And whether you value or understand APR or not, you'll always know the total cost of repayment up front - have a play with our sliders to see just how simple it is. Unfortunately, this level of flexibility and transparancy isn't standard in the world of finance. 

You're in control

Wonga doesn't force you to borrow a single pound more than you need, or remain in debt for longer than you want to be. We charge interest by the day, so you dictate the cost by choosing when to repay. We also let you select the exact sum of money required, so if you only want £121 it's fine. Take it for 15 days and it will cost around £24, or pay under £12 for the same money over five days. You can even repay Wonga earlier than promised and save money - there are no early repayment charges or other catches here.