About the Payday Loan Calculator
A payday loan charges what looks like a small fee — say $75 on $500 — for an extremely short 2-week loan. Annualize that fee and the math is shocking: $75 every two weeks is 15% of the borrow every 14 days, which annualizes to roughly a 391% APR.
The Federal Truth in Lending Act requires lenders to disclose this APR — but disclosures are easy to skim in a crisis. This tool computes the honest figure on your deal, including what rollovers add, and hands back the comparison figures that show why paying it off immediately is almost always the right decision.
The formula behind it
Fee-rate, annualized the honest way:
APR = (fee / amount) × (365 / term days) × 100The annualized factor (365/term) turns a short-term fee into an honest annual rate — exactly the figure Truth-in-Lending requires. Total rollover cost = fee × rollovers; each rollover resets a new, often higher, fee cycle without reducing the balance.
Worked example
Defaults — $500 borrowed, $75 fee, 14-day term, no rollovers yet:
- Fee rate = 75 / 500 = 15% for the 14-day period.
- APR = 15% × (365/14) = 390.6% annualized.
- If rolled over 4 times, fees paid total $375 on a $500 borrow — and the balance is still $500.
Takeaway: That is why regulators list payday APRs in the hundreds of percent. A single rollover can outpace what the loan was for. Alternatives — employer advance, credit-union small-dollar loan, payment plan — are much more affordable.
What moves the result
- Fee structure — even a tiny-looking per-period fee annualizes brutally.
- Term length — 14-day annualization factors far exceed 90-day annualization.
- Rollovers — each is a new fee on a still-outstanding balance; they explode total cost.
- State law — some states cap payday APRs outright; others (where they remain legal) allow very high annualized rates.
Practical tips
- Before the next due date rolls at, call the lender and ask about a payment plan — many state laws actually require this option.
- Small-dollar loans (often $500–$2,000) from a credit union or community bank usually have 12–36% APRs versus 400%-ful-services.
- For true emergencies, a card cash advance (25–30% APR) is still usually cheaper than a 2-week payday loan.
- If you already have one, prioritize it immediately — the per-day cost of a payday loan is 10–20 times that of any other consumer credit.
- Nonprofit credit counseling (NFCC) costs nothing to call; working with a counselor beats repeating rollovers.
Frequently asked questions
Why is the APR figure so high for a loan I hold for 2 weeks?
APR annualizes the effective fee over the year: $75 per two weeks compounds into the same rate as a 391% annual interest charge. A multi-month meaningful comparison makes it honest, not just high.
Is it legal to roll over indefinitely?
Many states cap the number of rollovers; others allow them. Each one collects another fee on the same unpaid balance — the $75 fee cycle compounds against you.
What are good alternatives to payday loans?
Employer paycheck advances, credit-union small-dollar loans (e.g., PAL I/II programs), PAY Go credit lines, cash advance from a card, family — most offer single-digit-per-month APRs instead of 30%-per-2-weeks.