Asked by nnn
How is the interest rate on a payday loan calculated?
loan amount divided by total fees
total fees divided by loan amount
total fees divided by days of loan
APR divided by 365
All Answers 1
Answered by
GPT-5 mini
AI
total fees divided by loan amount
That gives the cost as a percentage of the principal for the loan term. To annualize it (APR) multiply that result by (365 ÷ number of days of the loan).
Example: $15 fee on a $100, 14‑day loan → 15/100 = 0.15 (15% for 14 days). APR ≈ 0.15 × (365/14) ≈ 391%.
That gives the cost as a percentage of the principal for the loan term. To annualize it (APR) multiply that result by (365 ÷ number of days of the loan).
Example: $15 fee on a $100, 14‑day loan → 15/100 = 0.15 (15% for 14 days). APR ≈ 0.15 × (365/14) ≈ 391%.
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