Payday Loan Costs Explained: Fees, APR and Total Repayment

Payday loans are often quoted as a flat fee per $100 borrowed rather than as a traditional interest rate, but federal law also requires cost disclosures such as APR. The fee and the APR describe the same cost in different ways, and understanding both helps you evaluate what you're actually paying. This page explains the fee structure, what APR means on a short-term loan, and what to check on any offer before you agree.

Payday loans charge a flat fee tied to the amount you borrow - not a monthly interest rate. The fee is typically quoted as a dollar amount per $100 borrowed. How much lenders can charge depends heavily on state law - your state sets the maximum allowed fee, and some states prohibit payday lending entirely. Check your state's rules and fee cap.

• Your actual fee depends on the lender and your state.
• The fee is fixed at the time of the loan - it doesn't grow over time the way interest on a credit card does.
• If you repay on the due date, you pay exactly the agreed amount. No more, no less.

• What it is: the cost of consumer credit expressed as a dollar amount. On a simple payday loan with no additional charges, the finance charge equals the flat fee - it's the total dollar cost of borrowing.
• Where it appears: on your loan agreement, listed as a specific dollar amount - what you're paying on top of what you borrowed.
• What to check: if the loan includes any charges beyond the standard fee, confirm whether they're included in the finance charge total or added separately.

APR stands for Annual Percentage Rate - it expresses the cost of borrowing as if the loan lasted a full year. Federal lending law requires this disclosure on every loan.

• In practice on a single loan: you're not paying 391% of the loan amount - you're paying $15 on $100 over two weeks. APR is useful for comparing payday to other borrowing options, where the annualized cost is significantly higher than credit cards, installment loans, or personal loans.
• Where APR becomes more real: if you roll over or reborrow repeatedly, you pay the fee multiple times on the same underlying need. One fee is the cost of a short-term bridge - multiple fees on the same need start to approach what the APR suggests. See rollover risks.

Under federal lending law, the lender must disclose these before you agree:

If any of these are missing or unclear on the agreement, ask the lender before signing. You have the right to see these disclosures before you commit. See what to check at each step of the process.

• Additional charges in the agreement: if the agreement lists any charges beyond the standard fee, check whether they're included in the finance charge or added separately.
• Rollover or renewal fees: if your state allows extending the loan, rolling over means paying the fee again - sometimes multiple times. This is where payday borrowing can become expensive fast. See the full rollover cost picture.
• Late fees: if you don't repay on time, the lender may charge a late fee. The amount varies by lender and state. See what happens if you can't repay on time.
• Bank fees on your side: if the lender's debit attempt fails because your account balance is short, your bank may charge an overdraft or NSF fee. These are your bank's fees, not the lender's - but they add to your total cost.

If you're evaluating more than one offer, payday comparison is usually straightforward because terms are short and state caps may limit pricing variation:

• Compare total of payments: this is the single most useful number. If two lenders offer different fees on the same amount for the same term, the one with the lower total of payments costs less.
• Check for additional charges: does one offer include fees the other doesn't? Look at the finance charge and any line items beyond the standard fee.
• Verify the state cap: if an offer exceeds your state's maximum allowed fee, the lender may not be licensed in your state. Check your state's rules.