See the true APR behind a payday loan.
True APR
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Total fee for this loan
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Cost if rolled over 8 times
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Your breakdown
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A small fee in disguise
Payday lenders almost never quote an interest rate. They quote a fee: fifteen dollars per hundred borrowed, due in two weeks. Phrased that way, it sounds like a service charge, the kind you shrug at. The Truth in Lending Act, enforced through Regulation Z, exists precisely because that framing hides the real cost. A finance charge has to be translated into an annual percentage rate so borrowers can compare it to a credit card or a personal loan on equal footing. This tool does that translation. It takes the fee and the term and shows you the APR the lender would rather you never compute.
The arithmetic of why the number is so large is short. A $15 charge on $100 is a 15% cost. But that 15% buys you the money for only 14 days, not a year. There are roughly 26 of those 14-day windows in a year, and 15% charged 26 times annualizes to about 391%. The lender is renting you cash at a rate that would be flatly illegal for most other forms of credit.
Five hundred dollars for two weeks
Run the defaults: a $500 loan, a $15 fee per $100 borrowed, due in 14 days. The calculator computes the total fee, converts it to an APR, and then projects what happens if you cannot repay and roll the loan over the eight times the Consumer Financial Protection Bureau has found to be typical.
The single loan costs $75 in fees, which on its own already prices out at a 391% APR. The trap is the rollover. Borrowers who cannot produce the $575 on payday pay another $75 to push the due date out two more weeks, and the CFPB found the average borrower does this eight times. After eight rollovers the fees total $600, more than the $500 they originally borrowed, and the $500 principal is still owed in full. The fee never touches the balance.
The legal guardrails and the cheaper exits
The rules vary sharply by state. Some states cap payday APRs hard or ban the product outright, while others let triple-digit rates stand. One federal floor does exist: the Military Lending Act caps the all-in rate, the Military Annual Percentage Rate, at 36% for active-duty servicemembers and their dependents, which effectively shuts payday lending out of that group. Everyone else is left to their state's protections and to the APR disclosure that TILA requires the lender to print on the agreement, the number this tool reproduces.
This calculator is for anyone staring at a payday offer in a cash crunch, and the goal is to make the true price impossible to ignore before signing. The most damaging mistake is treating the fee as a one-time cost when the loan's two-week clock is built to drive rollovers. Practical exits that almost always beat 391%: ask your employer about a paycheck advance, draw on a credit card cash advance even at 30% APR since that is a tenth of the payday rate, look into a payday alternative loan from a credit union which federal rules cap at 28%, or negotiate a payment plan directly with the biller you are scrambling to pay. Building even a small emergency buffer is the durable fix, because the entire industry runs on people having no other option for two weeks.
Is a payday loan ever cheaper than a credit card?
Almost never. A credit card cash advance might run 25% to 30% APR, which feels expensive until you set it beside a payday loan's 391%. Even a maxed-out card with a late fee is an order of magnitude cheaper per dollar borrowed than rolling a payday loan. Run your own card's cash-advance APR through the comparison and the gap is stark. The only case where payday could edge ahead is if you genuinely repay in a single two-week cycle and have no card access at all, and even then the margin is thin.
Does paying the fee reduce what I owe?
No, and this is the heart of the trap. The fee is the cost of borrowing for the term; it does not touch the principal. When you roll the loan over, you pay a fresh fee and the full original balance still stands. That is why eight rollovers can cost $600 in fees while you still owe the entire $500. Unlike an installment loan where each payment chips at the balance, the payday fee buys you nothing but time, which is exactly how a $500 shortfall snowballs into far more than $500 paid out.