How the UK payday loan APR is worked out
A UK lender must state an APR for most regulated credit. The APR is the rate at which the repayments, discounted by the days elapsed divided by 365, equal the money you receive (FCA Handbook, CONC App 1.2). For a single repayment that reduces to one line: the APR is the amount you repay divided by the amount you borrow, raised to the power of 365 divided by the days, less one.
For £100 borrowed for 30 days at 0.8% a day the charge is £24.00 and the APR is 1,269.72%. The simple yearly rate, found by multiplying the cost per day by 365, is 292.00%. The gap is compounding, which the APR assumes.
How the length of the loan changes the APR
The same daily rate gives a different APR for each loan length. A one-day loan shows 1,732.71%, a 31-day loan 1,257.84%, and a loan held for 125 days, where the interest reaches the 100% total cost cap and stops at £100.00, shows 656.85%. A longer loan costs more pounds but has a lower APR, because the compounding assumed over a year matters less.
Fixed fees and the total charge
If your lender quotes a fixed fee or total charge instead of a daily rate, set the rate to 0 and enter it in the fee field. A £24 charge on £100 for 30 days gives 1,269.72%, the same as the capped daily rate. Interest and fees together count towards the initial cost cap of 0.8% a day, so a large fee can break the cap even when the daily rate is within it. The calculator shows a warning when it does.
Limits of an APR for a short loan
The APR assumes the loan and the same terms continue for a whole year. A payday loan usually lasts days or weeks, so judge it by the pounds you repay and the cap, and use the APR to compare with other credit. The effective rate depends on exact payment dates; this calculator counts whole days.
To see the total to repay and a late payment, use the UK payday loan calculator.
For the nominal US method, see the US payday loan APR calculator.
Inputs for the UK payday loan APR calculator
Amount borrowed
The amount you receive. The APR is worked from this and what you repay.
Days until you repay
The days from borrowing to the single repayment, from 1 to 365.
Daily interest rate
Percent of the amount borrowed charged each day. The cap is 0.8%. Use 0 if you only know a total charge.
Fixed fee or other charge
Any fee on top of daily interest, in pounds. Enter a lender's total charge here with the rate at 0.
CALCULATOR QUESTIONS
UK payday loan APR calculator questions
How do you calculate the APR on a payday loan?
For one repayment, divide the amount repaid by the amount borrowed, raise it to the power of 365 divided by the days, and subtract one. For £100 over 30 days at 0.8% a day that gives 1,269.72%.
Why is the APR so much higher than the daily rate?
The APR is an effective annual rate that compounds, while 0.8% a day is simple interest. The simple yearly figure is 292.00%; the effective APR of the 30-day loan is 1,269.72%.
What is the highest daily rate a UK lender can charge?
0.8% of the credit outstanding per day for interest and fees together, and no more than the amount borrowed in total (CONC 5A.2.3R and 5A.2.2R). The calculator warns you if your figures go beyond either limit.
Does a one-day loan really have a huge APR?
Yes. Compounding the charge for 365 days makes a one-day loan at 0.8% show 1,732.71%. That is why the pounds you repay tell you more about a very short loan than the APR.