Apples and oranges. Credit card rate is an APR (annual percentage rate). So if this loan product is for a period of less than a year, or some other arrangement, you need to annualize its rate to make the comparison.
I understand what APR is and assuming the one time 3% fee allows you to pay the loan off in one year (or more) then the APR ends up 3% (or less).
See NerdWallet article for an explanation of Kabbage fees, and pros and cons. I generally find their reviews of financial products reliable.
So the APR listed on that site is 24% - 99%. So, @Robert_W, how did you get just a one time 3% flat fee?
Robert probably works for Kabbage.
There are two different solutions offered by Kabbage that people are conflating. I was talking about Kabbage Cash Advance, which looks at your existing bookings and offers you a payout. You have to agree to repay them directly from your AirBnB Revenue, so for each stay, a % (mine was 50%) of payout is sent directly to Kabbage by AirBnB.
I believe what you’re talking about is Kabbage Host Capital which sounds to be an awful loan.
Ok, thanx for the clarification. So technically the 3% flat fee would be a higher APR because the amount would end up being paid back quicker than a year, and would not be planned payments but out of payouts.
So, for example, if I average $1500/month payouts then the $2500 advance would be paid back about $750 each of the first three months and then $250 the fourth month.
I would want to calculate APR to be able to compare apples to apples. The calculated APR on that would work out to something closer to 30% than 3% i would think. Please feel free to calculate it yourselves but in this case it is much less attractive. But this makes more sense with the advertised rates Kabbage has.
So what made you sign up to this forum @Robert_W?
How long have you been hosting and where?
APRs are nominal interest rates and can NOT be used to compare different rates (they can tell you whether the cost of borrowing is closer to 3% or 30%). But the way they are annualized is by multiplication, so if different underlying time periods are used, they do not reflect the actual cost of borrowing.
It gets even more distorting when different assumptions on the repayment period are made. So if someone quotes you a mortgage rate as APR of x.xx%, they typically assume an amortization period of 30 years. That is up front fees are assumed to be paid off over 30 years. The average life of a mortgage in the USA is much shorter, more like 6-7 years (moving, refinancing, etc). That means the upfront fees are paid over a much shorter period in reality, drastically increasing the actual cost of borrowing.