The payday loan APR formula
For a loan with one advance and one payment, shorter than a year and not a whole number of months, Regulation Z Appendix J sets the number of unit-periods in a year at 365 divided by the days in the term. The APR is then the fee divided by the amount financed, multiplied by that number of periods, and shown as a percentage.
A $300 loan with a $45 fee over 14 days gives 391.07%: 45 divided by 300 is 0.15, times 365 divided by 14, times 100. A $100 loan with a $15 fee over the same 14 days gives 391.07%, and fees of $10 and $30 on $100 give 260.71% and 782.14%.
When the fee comes out of the advance
Some loans take the fee out of the cash you receive. On the same $300 loan with a $45 fee, you receive $255.00 and repay $300.00. The amount financed is smaller, so the APR rises to 460.08%. The fee is $17.65 for every $100 you actually receive.
What counts as a fee
The finance charge in the APR is the cost of credit. Late fees, returned payment fees and prepaid card fees are charged only in some circumstances and are left out of the APR. Add the fee you will certainly pay, and compare the total with the payday loan calculator, which adds other fees.
The 36 percent limit for service members
The Military Lending Act sets a limit of 36 percent on the annual percentage rate for a covered service member or dependent (10 U.S.C. 987(b)). The law's military APR counts more charges than this calculator does, so a figure below 36 percent here does not prove a loan is allowed. The calculator shows a note when the APR is above 36 percent.
To see rollovers and the total repaid, use the US payday loan calculator.
In the UK the APR is an effective rate; see the UK payday loan APR calculator.
Inputs for the US payday loan APR calculator
How the fee is paid
Added means you repay the loan plus the fee. Taken from the advance means you receive the loan less the fee.
Loan amount
The face amount of the loan, before any fee is taken off.
Fee
The finance charge for the loan in dollars. Late fees and returned payment fees are left out.
Loan term
The days from borrowing to the single repayment, from 1 to 365.
CALCULATOR QUESTIONS
US payday loan APR calculator questions
How do I calculate the APR on a payday loan?
Divide the fee by the amount financed, multiply by 365 divided by the number of days, then multiply by 100. For a $45 fee on $300 over 14 days that is 391.07%.
Why is a payday loan APR so high?
The fee is charged for a very short term, and the APR scales it up to a year. A $15 fee per $100 for 14 days is 391.07%, consistent with the CFPB's statement that such a loan is almost 400 percent APR.
Does the APR change if the fee is taken from the loan?
Yes. You receive less, so the amount financed is smaller. On a $300 loan with a $45 fee the APR is 460.08% instead of 391.07%.
Is there a limit on the APR of a payday loan?
There is no federal cap for most borrowers, so state law sets the fee. The Military Lending Act limits the rate to 36 percent for covered service members and dependents.