How to use the payday loan apr calculator
- Enter the amount borrowed.
- Choose whether the fee is quoted as dollars per $100 borrowed or as a total fee, and enter it. Include any other charge for the loan in the total.
- Enter the days until you repay, which is the length of one term.
- If you may renew or roll the loan over, enter how many times. Read the APR, the fee, the repayment amount and the fees over all terms.
Formula
Fee = amount / 100 x fee per $100 (or the total fee you enter)
APR = fee / amount x 365 / days x 100
Total fees = fee x (1 + renewals)
Compounded rate = ((1 + fee / amount) to the power 365 / days - 1) x 100
The APR here is the simple annualized rate of one fee over one term. The compounded rate is shown only to illustrate how a fee charged again and again grows.
$15 per $100 on a $400 loan for 14 days
A $400 loan with a fee of $15 for each $100 has a fee of $60. The fee is 15% of the amount. Scaled to a year, APR = 60 / 400 x 365 / 14 x 100 = 391.07%. You repay $460 at the end of the first 14 days.
If the loan is renewed twice, you pay three terms of $60, which is $180 in fees over 42 days and still leaves the original $400 owed. If the same fee were charged on a growing balance for a whole year, the compounded rate would be about 3,724%.
Why a short loan has such a high APR
A fee that looks small next to the amount becomes a large yearly rate when the term is short, because the same percentage is earned many times a year. A 15% fee for two weeks is 15% about 26 times in a year. That is why APR, not the dollar fee alone, is used to compare loans of different lengths.
Compare the result with other borrowing using the APR calculator or the loan calculator, where fees spread over many months give a very different yearly rate.
What the calculation leaves out
The tool treats the fee as the entire cost. If a lender subtracts the fee from the money you receive, or charges more than one fee, the APR on your contract can differ, so enter the full finance charge as the total fee. A contract's own disclosure is the figure to rely on.
Renewals mean paying the fee again without reducing what you owe. If you are weighing options, the debt consolidation calculator can help compare paying a short loan off with other plans.
Assumptions and limits
- The fee, amount and days are the numbers you enter. The tool does not know any lender's actual terms.
- APR is fee over amount, scaled to 365 days. It does not model several payments or fees taken out of the proceeds.
- The compounded rate is illustrative and assumes the same fee on a growing balance every term.
- This is not legal or financial advice, and the APR on a real loan follows the lender's disclosure.
Frequently asked questions
How do I convert a payday loan fee to an APR?
Divide the fee by the amount borrowed, multiply by 365 divided by the days of the term, and then by 100. A $60 fee on $400 for 14 days works out to 391.07%.
What does a fee per $100 mean?
It is the charge for every $100 you borrow. At $15 per $100, a $400 loan costs $60, because 400 divided by 100 is 4 and 4 times 15 is 60.
What happens to the cost if I renew the loan?
Each renewal charges the fee again without paying down the balance, so the fees add up. Two renewals on a $60 fee mean $180 of fees for the same $400 borrowed.
Why is the compounded rate so much larger than the APR?
The APR counts the fee once per term on the original amount. The compounded rate assumes each new fee is charged on a balance that already includes earlier fees, so growth builds on itself.