How Payday Loan Interest Rates Are Calculated

When you take out a payday loan, the direct lender will typically charge you a fee for borrowing the money. This fee is generally expressed as a percentage of the total loan amount, and is commonly referred to as the “interest rate.” In some cases, the interest rate may be a flat fee, regardless of the loan amount.

The actual amount of interest you will pay on your loan will depend on a number of factors, including the amount you borrow, the length of time you keep the loan, and any fees or other charges that may be associated with the loan. Generally speaking, the longer you keep the loan, the more interest you will end up paying.

To calculate the interest on a payday loan, you will first need to determine the annual percentage rate (APR). The APR is the interest rate that would be charged if you kept the loan for an entire year. To calculate the APR, you will need to know the fees associated with the loan, as well as the length of time you will be keeping the loan.

Costs and Fees for a Payday Loan Rollover

If you cannot repay your payday loan when it is due, you may be able to “roll it over” by paying an additional fee and extending the loan for another term. However, this is not always an option, and even if it is, it can end up costing you a lot of money in fees and interest charges.

Before you roll over your payday loan, be sure to understand the costs and fees associated with doing so. In most cases, you will be required to pay a new fee for borrowing the money, as well as any additional interest that may accrue over the course of the extended loan term.

In some cases, you may also be charged a “rollover fee” by your lender. This is a fee charged for the privilege of extending your loan, and is generally expressed as a percentage of the total loan amount. For example, if you have a $100 loan with a 20% rollover fee, you would need to pay an additional $20 to extend the loan for another term.

As you can see, the costs and fees associated with payday loan rollovers can add up quickly. Be sure to take these into account when considering whether or not to extend your loan.

The Bottom Line

Payday loans can be expensive, so it’s important to understand how the interest rates are calculated before you take one out. In most cases, the interest rate is a percentage of the total loan amount, and is expressed as an APR. The actual amount of interest you will pay will depend on the length of time you keep the loan, as well as any fees or other charges that may be associated with the loan.