How a payday loan fee becomes an APR
A payday loan usually charges one flat fee for one short term, commonly about two weeks. The Consumer Financial Protection Bureau says many state laws cap that fee at between $10 and $30 for every $100 borrowed, and that a two-week loan with a $15 fee per $100 has an APR of almost 400 percent. The APR here is the nominal rate from Regulation Z Appendix J: the fee divided by the amount financed, multiplied by 365 divided by the days in the term.
On a $300 loan for 14 days at $15 per $100 the fee is $45.00, so you owe $345.00 when the term ends and the APR is 391.07%. A $10 fee per $100 on the same 14 days is 260.71%, and $30 per $100 is 782.14%.
Worked example: a loan rolled over three times
Some states let a lender renew a loan so that you pay only the fee. Borrow $500 at $15 per $100 for 14 days and roll it over three times. Each term costs $75.00, so the fees over all four terms come to $300.00 and you repay $800.00 in total over 56 days. The principal never falls, and the APR stays 391.07%.
A rollover does not reduce what you borrowed. It buys more time at the price of another fee, which is why repeated rollovers are expensive.
Late, returned payment and other fees
Late, returned payment (non-sufficient funds) and prepaid card fees are charged on top of the loan fee. Enter them in the last field to see the full cost. For $400 at $10 per $100 with one rollover and $35 of other fees, the total repaid is $515.00. The APR leaves these fees out, as it does for most disclosures, so compare the total repaid as well.
Check your state and the Military Lending Act
States differ. Some cap the fee, some limit the loan size or the number of rollovers, and some do not permit payday lending. This calculator does not apply a state table, so type the fee your lender quotes. Under the Military Lending Act a lender may not charge a covered service member or their dependent an annual percentage rate above 36 percent (10 U.S.C. 987(b)). The calculator warns you when the APR is above 36 percent.
To check a lender's APR from the fee, use the US payday loan APR calculator.
Inputs for the US payday loan calculator
Amount borrowed
The amount of the loan in dollars. Many payday loans are a few hundred dollars.
Fee for every 100 borrowed
The flat fee your lender charges per $100. Your state may limit it.
Days in each term
The days until the loan is due. A common payday loan term is about two weeks.
Times rolled over
How many times you pay the fee again to extend the loan. Some states do not allow rollovers.
Late or other fees
Late, returned payment or other fees you expect to pay. They are added to the total, not the APR.
CALCULATOR QUESTIONS
US payday loan calculator questions
How is the APR of a payday loan calculated?
Divide the fee by the amount financed, multiply by 365 divided by the days in the term, and multiply by 100. A $45 fee on $300 for 14 days gives 391.07%.
Does rolling over a payday loan change the APR?
No. Each rollover repeats the same fee for the same term, so the APR stays 391.07%, but the fees add up. Three rollovers on $500 cost $300.00 in fees.
Is there a federal limit on payday loan fees?
There is no federal cap on the fee for ordinary borrowers. The Military Lending Act caps the APR at 36 percent for covered service members and their dependents. Most limits come from state law.
Are there cheaper alternatives to a payday loan?
Compare the APR and the total repaid with other options, such as a smaller loan from a credit union or a payment plan with the creditor you owe.