1. What is Payday Loan Interest Rate?

The Payday Loan Interest Rate (Annual Percentage Rate or APR) represents the true cost of borrowing, expressed as a yearly rate. It helps compare different loan offers by standardizing the cost calculation.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( r \) — Annual percentage rate (APR, %)
• \( Interest \) — Interest charged (USD)
• \( PV \) — Principal amount (USD)
• \( Days \) — Loan duration (days)

Explanation: The formula converts the short-term loan cost into an equivalent annual rate for better comparison across different loan terms.

3. Importance of APR Calculation

Details: APR calculation is crucial for understanding the true cost of payday loans, which often appear deceptively cheap when only looking at the flat fee. The APR reveals how expensive these loans become when annualized.

4. Using the Calculator

Tips: Enter the interest amount you'll be charged, the principal loan amount, and the duration in days. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why is APR important for payday loans?
A: APR standardizes the cost, making it easier to compare loans of different amounts and durations. Payday loans often have extremely high APRs (300%+).

Q2: What's considered a high APR?
A: While credit cards might have 15-30% APR, payday loans typically range from 200% to over 600% APR.

Q3: Does this calculator account for compounding?
A: No, this calculates simple interest APR. Actual costs may be higher if interest compounds.

Q4: Are there alternatives to payday loans?
A: Yes, consider credit union loans, payment plans with creditors, or small personal loans which typically have much lower APRs.

Q5: Is this APR calculation accurate for rollover loans?
A: For single-term loans only. Rollovers (renewals) would result in even higher effective APRs due to additional fees.