Payday Loan Calculator,
the real APR revealed.

Field guide

How APR works — and why payday lenders hide it.

Annual Percentage Rate (APR) is the standardized cost of credit expressed as a yearly interest rate. Federal law (the Truth in Lending Act, Reg Z) requires lenders to disclose APR — but payday lenders often bury it in fine print and instead advertise a deceptively simple "fee per $100 borrowed." A $15 fee on a $100 loan sounds reasonable. A 391% APR does not.

How to calculate the true APR

Converting a flat fee to an annual rate requires one formula:

The first term — Fee ÷ Loan Amount — is the interest rate for the period. Multiplying by 365 ÷ Term annualizes it, projecting what that rate would be if sustained for a full year. That projection is what makes payday loans look so catastrophic: a 2-week loan compounds into a yearly rate over 26 identical periods.

Example: A $75 fee on a $500 loan for 14 days.

By comparison, the average credit card charges 24% APR. The average personal loan charges 10%. A payday loan at 391% costs roughly 16× more than a credit card and 39× more than a personal loan.

Why payday loans create debt traps

The structure of a payday loan is designed around a borrower's most vulnerable moment. The entire balance — principal plus fee — is due on the next payday, typically within 14 days. For someone who could not afford a $500 expense in the first place, repaying $575 in two weeks is often impossible.

The result is rollover. Most states permit lenders to extend the loan for another fee. A borrower who rolls over a $500 loan three times has paid $300 in fees and still owes $500. After six months of rollovers, fees exceed the original principal. The Consumer Financial Protection Bureau (CFPB) found that 4 in 5 payday loans are rolled over or renewed within 14 days, and that the majority of loan volume comes from borrowers who take out 10 or more loans per year.

This is not accidental product design. It is the business model. The profitable customer is not the one who repays on time — it is the one who rolls over indefinitely.

The 36% threshold

Financial experts, consumer advocacy groups, and military lending law all converge on 36% APR as the upper boundary of sustainable credit. The Military Lending Act caps loans to active-duty service members at 36% for exactly this reason. Sixteen states and the District of Columbia have enacted 36% APR caps for civilian borrowers. Where those caps exist, predatory payday lending largely disappears from the market.

Better alternatives to a payday loan

Before taking a payday loan, exhaust every alternative. In order of typical cost:

• Credit union Payday Alternative Loans (PALs): Federally-regulated credit unions offer PALs capped at 28% APR, with terms of 1–6 months and loan amounts up to $1,000 (PAL I) or $2,000 (PAL II). Membership is often open to anyone who lives or works in a given area. This is the single best legal alternative to a payday loan.
• Employer paycheck advance: Many employers will advance one pay period at no cost if asked directly. Apps like DailyPay, Even, and Earnin provide on-demand access to earned wages for a small flat fee — often under $10, implying an APR well below 36%.
• Credit card cash advance: Cash advances carry high APRs (typically 25–29%) and a 3–5% transaction fee, but the rate is still an order of magnitude lower than a payday loan. If you have available credit, this is a better option.
• Personal installment loan: Online lenders (LightStream, SoFi, Marcus) offer personal loans from 7–36% APR with 24–60-month repayment terms. Even a 36% personal loan is dramatically cheaper than a 300%+ payday loan because you repay it over months, not 14 days.
• Borrowing from family or friends: Uncomfortable, but free. Formalize it with a written note and a realistic repayment schedule to preserve the relationship.
• Local assistance programs: Many nonprofits, community action agencies, and religious organizations provide emergency financial assistance with no interest. 211.org connects callers to local services in all 50 states.
• Negotiate a payment plan: If the underlying expense is a bill — medical, utility, rent — call the creditor directly and ask for an extension or installment plan. Most will accommodate rather than send the account to collections.