Compute the real annual percentage rate (APR) and total repayment cost of a payday loan, revealing the true cost of short-term high-interest borrowing.
Input Data
Results
At a glance:The APR annualizes a payday loan's fees over its short term, exposing the very high effective cost of this borrowing.
Formula
apr ≈ (financeCharge / loanAmount) × (365 / termDays) × 100%
totalMonthlyFees = monthlyFeePercent% × (termDays / 30) × loanAmount
totalCost = loanAmount + financeCharge + totalMonthlyFees
How to Use
- Enter the loan amount and finance charge.
- Enter the term in days and any monthly fee rate.
- Review the APR and total repayment cost.
FAQ
Why is the APR on a payday loan so high?
Because the finance charge is large relative to the principal, and the term is extremely short — annualized, that combination explodes into a huge rate (hundreds of percent). That is exactly why payday loans are seen as predatory.
What is a roll-over?
When you cannot repay on time, the lender may let you pay a fee to extend, or take out a new loan to cover the old one. This keeps compounding fees and interest, and the principal can balloon several-fold — a debt spiral to avoid.
What are better alternatives?
Consider an advance from your employer, help from family or friends, a credit union, credit-card instalments, or a personal loan (P-loan) at a much lower rate before turning to a payday loan.
What are much better emergency options in Hong Kong?
Payday-loan annualized cost routinely runs into hundreds of percent — among the most expensive borrowing there is — and should be a last resort. Cheaper alternatives for emergency cash: first, an employer salary advance (often zero or very low cost); second, a credit card — even at its highest rate (around 30%) far below payday's hundreds of percent, and zero if paid within the interest-free period; third, a bank or finance-company personal loan (P-loan) usually single-digit to low-double-digit APR, repayable in instalments; fourth, family or friends; fifth, if it is chronic shortfall, seek free counselling from a non-profit rather than borrowing more. Hong Kong regulates money-lenders under the Money Lenders Ordinance with a capped effective annual rate, but even legal, payday-style high-interest short loans are very costly. Before any borrowing, ask: am I 100% sure I can repay on time with interest? Have I exhausted the cheaper options above?
Why does a 'mere HK$15 fee' become an APR near 400%?
The key is that APR annualizes the fee — it reflects the cost 'if you borrowed at that rate for a full year'. Two features of payday loans blow up this annualized number: first, the fee-to-principal ratio itself is high (borrow 100, pay 15 = 15% for just those 14 days); second, the term is extremely short (14 days is only about 1/26 of a year). Annualizing: 15% × (365 ÷ 14) ≈ 391%. Many people see only 'just HK$15' and miss how short the term is — that 'high rate × very short term' combination is what makes the annualized rate so shocking. Always convert any short-term loan to its APR to compare fairly with credit cards and personal loans.
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.