Payday Loan Calculator

About Payday Loans

A payday loan is a short-term, high-cost loan that is typically due on your next payday. These loans are usually for small amounts (typically $500 or less) and come with very high fees that translate to extremely high annual percentage rates (APRs).

How Payday Loan Costs Are Calculated

Payday loans typically charge a fixed fee for every $100 borrowed. For example, a common fee structure is $15 per $100 borrowed for a two-week loan. This translates to:

1. Fixed Fee: The lender charges a set amount per $100 borrowed (e.g., $15 per $100)
2. APR Calculation: The annual percentage rate is calculated by dividing the fee by the loan amount, then multiplying by the number of days in a year (365), then dividing by the loan term in days
3. Rollover Fees: If you can't repay the loan on time, you may "roll it over" by paying another fee, which significantly increases the total cost

Example Calculation

For a $500 payday loan with a $75 fee for 14 days:

• Fee per $100 = $15 ($75 / 5)
• APR = ($75 / $500) × (365 / 14) × 100 = 391.07%
• Amount due at maturity = $500 + $75 = $575

Why Payday Loans Are Expensive

Payday loans have extremely high APRs because:

• The fees are high relative to the loan amount
• The loan terms are very short, so the fees are annualized over a much longer period
• Many borrowers end up rolling over the loan multiple times, compounding the costs

Alternatives to Payday Loans

Before taking out a payday loan, consider these alternatives:

• Negotiate payment plans with creditors
• Ask for an advance from your employer
• Use a credit card cash advance (typically much lower APR than payday loans)
• Borrow from friends or family
• Seek assistance from local charities or community organizations
• Consider a small personal loan from a credit union