Key takeaways
- Payday lenders usually charge a flat fee per $100 borrowed, commonly in the range of $10 to $30 depending on the state.
- On a two-week loan, a $15 fee per $100 works out to an APR of roughly 390%.
- Rolling a loan over repeats the fee without paying down the balance, so costs can quickly exceed the amount borrowed.
- Compare total dollars paid, not just the fee, and check credit union and payment-plan options first.
In this guide
Payday loans typically cost a flat fee of about $10 to $30 for every $100 you borrow, depending on state law and the lender. On a standard two-week loan, a common $15-per-$100 fee equals an APR of roughly 390%. Borrow $400 and you would repay about $460 two weeks later, and renewals add that fee again each time.
Because lenders quote fees in dollars rather than as an interest rate, the true cost is easy to underestimate. This guide shows how the fee works, how to convert it to an APR yourself, and how quickly costs grow when a loan is renewed.
How payday loan fees work
Most payday loans charge a finance fee based on the amount borrowed, stated as dollars per $100. You pay the fee plus the full loan amount in a single payment on your due date, usually your next payday.
A few things shape the fee you see:
- State law. Many states cap the fee per $100, limit the maximum loan amount, or cap the APR. Some cap it so low that payday loans are not offered at all. See our overview of payday loan laws.
- Loan amount. Some states use tiered fees, for example a higher fee on the first $100 and a lower one on later amounts.
- Loan term. The same dollar fee is far more expensive on a 14-day loan than a 30-day loan when expressed as an APR.
- Extra charges. Where allowed, late fees, returned-payment fees or database verification fees can add to the total.
How to convert a payday loan fee to APR
You can calculate the approximate APR yourself with three numbers: the fee, the amount borrowed and the loan term in days.
APR = (fee ÷ amount borrowed) × (365 ÷ days in loan term) × 100
The same math at different fee levels and terms shows how much the loan length matters:
| Fee per $100 | 14-day loan APR | 30-day loan APR |
|---|---|---|
| $10 | about 261% | about 122% |
| $15 | about 391% | about 183% |
| $20 | about 521% | about 243% |
| $30 | about 782% | about 365% |
These are illustrations, not quotes. Your lender's Truth in Lending disclosure will show the exact APR and finance charge, and it should roughly match your own calculation.
What rollovers and re-borrowing add
The fee is only the starting cost. If you cannot repay in full on the due date, many lenders (where state law allows) offer to roll the loan over: you pay only the fee, and the full balance is extended for another term. In states that ban rollovers, borrowers sometimes repay and immediately take out a new loan, which has the same effect.
That is why the cost of a payday loan depends less on the fee and more on how many times it is renewed. Our guide to payday loan rollovers explains the cycle and the extended payment plans that some states require lenders to offer at no extra cost.
Hidden and indirect costs to watch for
Beyond the finance charge, several costs do not appear in the headline fee:
- Bank overdraft or NSF fees if the lender's withdrawal hits your account when the balance is short.
- Repeated withdrawal attempts, which can trigger multiple bank fees for the same payment.
- Late or returned-payment fees charged by the lender, where permitted.
- Collection activity if the loan goes unpaid. See what happens if you don't pay a payday loan.
- The cost of the next shortfall. Repaying $460 out of one paycheck can leave you short again, which is how many borrowers end up borrowing repeatedly.
How payday loan costs compare with other options
Here is a broad comparison of borrowing $400 for about a month. Figures are rounded illustrations meant to show scale, not quotes; actual costs vary by lender, credit and state.
| Option | Rough cost to borrow $400 for about a month | Notes |
|---|---|---|
| Payday loan, $15 per $100, renewed once | about $120 | Two fees on a two-week product |
| Credit union payday alternative loan at 28% APR plus a $20 fee | roughly $30 | Longer terms spread the payment out |
| Credit card cash advance | roughly $15 to $30 | Cash advance fee plus interest from day one |
| Payment plan with the original biller | Often $0 to a small fee | Depends on the company |
Federal credit union payday alternative loans stand out because their rate is capped at 28% and the application fee is limited to $20. Other options, including employer advances and local assistance programs, are covered in our guide to payday loan alternatives.
How to estimate your true cost before you borrow
Before you sign anything, run through these questions:
- What is the exact fee in dollars, and what is the total I will repay on the due date?
- What is the APR on the disclosure, and does it match my own math?
- After repaying, will I have enough left from that paycheck for rent, food and bills?
- If not, what would one or two rollovers cost in total?
- Is there a cheaper option I can get in the same time frame?
If question three is a no, the realistic cost is not one fee but several, and a cheaper option is worth the extra effort. It also helps to write down the exact due date and set a reminder a few days before, so you can contact the lender and ask about an extended payment plan if the money will not be there.
The bottom line
A payday loan's fee looks small in dollars but usually equals an APR in the hundreds of percent, and each rollover repeats that fee without reducing the balance. Do the math on the total repayment before you borrow, plan for whether you can repay in one paycheck, and compare credit union loans or payment plans that cost far less.
Frequently asked questions
How much does a $500 payday loan cost?
It depends on your state and lender. At a fee of $15 per $100, a $500 loan costs $75 in fees, so you would repay $575 on your due date. If you roll it over twice, you could pay $225 in fees and still owe the original $500. Some states cap fees lower, and some do not allow loans that large.
Why is the APR on a payday loan so high?
APR expresses the cost as a yearly rate. Payday fees are charged for a very short period, often two weeks, so when you scale that fee to a full year the rate becomes very large. A $15 fee per $100 for 14 days is about 15% for two weeks, which is roughly 390% on an annual basis.
Do payday lenders have to tell you the APR?
Yes. Under the federal Truth in Lending Act, lenders must disclose the finance charge and the annual percentage rate before you sign. Look for the disclosure box in your loan agreement, which shows the APR, the finance charge in dollars, the amount financed and the total of payments.
Are there extra fees besides the finance charge?
There can be, depending on state law. Some loans carry late fees or returned-payment fees if a withdrawal fails, and your own bank may charge overdraft or NSF fees. Some states limit or prohibit these extra charges. Read the agreement and your state rules so you know every fee that could apply.
Is a payday loan cheaper than an overdraft fee?
Sometimes on a single occasion, but not reliably. It depends on the size of the shortfall, how long it lasts and the specific fees. A payday loan can also lead to overdraft fees if the repayment withdrawal hits an account without enough money. Asking your bank about overdraft relief or a small loan may be cheaper than either.
Official Resources & Further Reading
Use these resources to check current guidance. Requirements and availability may vary by state and provider.
This guide is for general educational purposes and is not individualized financial, legal, tax or insurance advice. Product terms, rates and availability vary by provider and location. How we make money.
