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Payday Loans – How To Calculate Your Loan Interest For Free

Payday loans are the types of loans that you can borrow even if you have a bad credit rating, and repay back on the next payday. Loans such as these are unsecured, have fast approval and huge interest rate because these loans are riskier to payday lenders.

The so called exorbitant rates of payday loans are the primary reason why there are still people that consider these types of loans bad for their finances. By the way, finance charges are often in flat dollar amount, so to calculate the interest cost you have to do it manually.

In order to help you understand better how payday lenders compute interest rates, below are the steps you needed to follow to get the interest cost.

  • First, determine how much you will borrow from payday lender then know the finance charge amount and the loan term. Once you have the amount figured, proceed to the second steps.
  • To compute the interest rate, divide the finance charge amount by the loan amount. For example, if you borrow $200 and the total amount of finance change is $20, just divide the $20 with $200 and you will get 0.1.
  • Next, multiply the derived number or the 0.1 to the number of days a year, which is 365 days. So, divide 0.1 by 365 days and you will get 36.5 or if the loan is payable in 10 days then just divide 10 by 365 and you will get 3.65.
  • Last, the number you derived from step 3 must be multiplied by 100 for you to get the APR or annual percentage rate that you will need to pay.


As you can see, it is easy to determine how much is the cost of a $200 loan, which could help you decide if payday loans are indeed expensive or just like other types of loans available these days.