Formula

APR = ( Loan Fee x 36500 ) / ( Repayment Time x Loan Amount )

Example:You get a payday loan for $100, and you pay a fee of $10. The loan must be repaid within 14 days.

What is the APR?

The Consumer Federation of America explains how to calculate the APR on a short-term payday loan:

Divide the finance charge by the loan amount.

Multiply the result by 365.

Divide the result by the term of the loan.

Multiply the result by 100.

To solve the example above:

$50 divided by $500 equals 0.1.

0.1 multiplied by 365 equals 36.5.

36.5 divided by 14 equals 2.6071 (this is your APR in decimal format).

2.6071 multiplied by 100 equals 260.71% APR.