Payday Loan True Cost Calculator

What this calculator does

A payday loan is a short-term, fixed-fee borrowing product: a sum borrowed today, repaid in full plus a flat fee on the next pay date, with the option to extend ("roll over") for another period and another fee. The fee looks small in absolute terms but compresses a meaningful charge into a short window, which produces a high annualised rate when expressed in the same units as other credit products. This calculator turns the four inputs — loan amount, fee per period, term in days, and number of rollovers — into the four numbers that compare cleanly against any other borrowing: annualised APR, total fees, total days borrowed, and total fees as a percentage of principal.

The math

The annualised APR scales the single-period fee-to-principal ratio up to a yearly rate by multiplying by 365 ÷ term-days. Total fees are the per-period fee multiplied by (1 + rollovers), since the borrower pays the fee once at origination and once for each rollover. Total days borrowed is the term days multiplied by (1 + rollovers). When fees and days scale together at the same rate (which is the standard rollover structure), the per-period APR equals the multi-period APR — so the single APR figure remains an appropriate rate-of-cost expression even when rollovers are factored in. What does scale with rollovers is the absolute fee burden: every rollover adds another period of fees on top of the principal still owed.

How to read the result

The APR figure tells you what the loan would cost expressed at the standard annual rate used in every regulated credit product. The total fees figure tells you the absolute amount paid on top of the principal. The two numbers answer different questions: APR is for comparison against other credit options; total fees is for cash-flow planning. A 391% APR on a 14-day, 60-fee loan against 400 principal becomes 180 in total fees over 42 days if rolled over twice — the rate stays at 391% but the absolute cost is now 45% of the amount borrowed.

Why APR is the right comparison metric

Annualising a short-term fee can feel artificial — "I'm only borrowing for 14 days, why express it as a yearly rate?" The reason is that every other borrowing product is quoted as APR: credit cards, personal loans, mortgages, lines of credit, overdrafts. Comparing a short-term fixed fee to an APR on a longer-term loan without converting first is comparing different units. Once both are in APR terms, the comparison is direct: if a credit card sits at 25% APR and the payday loan computes to 391% APR, the credit card is roughly fifteen times cheaper per unit of borrowing time. Whether that comparison is actionable depends on access to the credit card, but the comparison itself is now valid.

What the calculation does not capture

The output assumes the fee structure stated. Real loan agreements may include extra charges that don't fit the basic fee-per-period model — late fees if the loan isn't repaid on schedule, NSF (non-sufficient funds) charges if a debit fails, collection costs if the loan defaults. The calculator covers the headline cost, not the full distribution of possible costs. Local regulation, where it exists, may also cap total fees at a percentage of principal, change the maximum term, or require specific disclosures — those vary by jurisdiction and are not built into the math here.

Worked example

A 400 loan with a 60 fee, 14-day term, and 2 rollovers. Total fees = 60 × 3 = 180. Total paid = 400 + 180 = 580. Total days borrowed = 14 × 3 = 42. Annualised APR = (60 ÷ 400) × (365 ÷ 14) × 100 ≈ 391%. Total fees as percent of principal = 180 ÷ 400 = 45%. The same scenario with no rollovers: total fees 60, APR still 391%, total fees as percent of principal 15%. The APR is unchanged, but the absolute cost triples.