Payday lenders often quote flat fees rather than annual percentage rates. A standard $15 fee per $100 borrowed for two weeks equates to an astronomical 391% APR.
The Federal Truth in Lending APR Formula
True Payday Loan APR Formula
APR = (Finance Fee ÷ Principal Borrowed) × (365 ÷ Loan Term in Days) × 100
Payday Loans vs. Mainstream Alternatives
| Financing Alternative | Typical APR Range | Cost on $500 for 14 Days |
|---|---|---|
| Payday Loan | 391% – 520% | $75.00 – $100.00 |
| Credit Union PAL Loan | 18% – 28% | $3.45 – $5.37 |
| Credit Card Cash Advance | 25% – 30% | $4.80 – $5.75 |
| Personal Bank Loan | 8% – 15% | $1.53 – $2.88 |
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