Payday Loan Calculator đ¸
Determine the total cost and true **Annual Percentage Rate (APR)** of short-term, high-cost payday loans.
Payday Loan Details
Key Features of This Calculator
- **Fee Calculation:** Accurately determines the total flat fee based on the amount borrowed.
- **True Cost:** Calculates the full repayment amount required at the end of the short term.
- **APR Exposure:** Converts the short-term, fee-based cost into an effective annual rate for comparison.
The Payday Loan Calculation Method
Payday loans are typically fee-based, not interest-based. The cost is the fee, and the APR is calculated by annualizing this fee over the short loan term.
1. Total Flat Fee ($Fee_{Total}$)
Fee_{Total} = (Principal / 100) Ã Fee per $100
2. Total Repayment ($Repay_{Total}$)
Repay_{Total} = Principal + Fee_{Total}
3. Annual Percentage Rate (APR)
The APR is calculated using the formula for simple interest where the fee is treated as the interest charge over the loan period.
APR = ( (Fee_{Total} / Principal) Ã (365 / Term in Days) ) Ã 100
This shows the true cost of the loan if it were extended for a full year.
Understanding the Danger of Payday Loans
A **payday loan** is a short-term, unsecured loan, typically due on the borrower's next payday (usually 14 days). They are marketed as quick fixes for emergency expenses, but their primary feature is their **exorbitantly high cost**, which can trap borrowers in a cycle of debt.
Why the APR is So High (H4 for cost explanation)
Lenders often charge a flat fee, such as $15 for every $100 borrowed. While this fee seems small, because the term is so short (e.g., 14 days), the APR is extreme. For example, a $15 fee on a $100 loan over 14 days translates to an APR of over 391%! This calculator provides the essential context to understand that actual cost.
Alternatives to Payday Loans (H4 for risk mitigation)
Before considering a payday loan, explore safer and less expensive alternatives:
- **Credit Union Loans:** Many offer "payday alternative loans" (PALS) with much lower APRs (capped by regulation).
- **Personal Loans:** Even small personal loans from traditional banks or online lenders generally have significantly lower rates.
- **Employer Advances:** Some employers offer payroll advances at no cost.
- **Debt Counseling:** Non-profit credit counseling agencies can help you manage financial distress without high-cost borrowing.