Payday loans are small, short-term loans due on your next payday. Their fees translate to APRs that can approach or exceed 400%, which makes them a debt trap for many borrowers.
How the cost adds up
A typical fee of $15 per $100 borrowed for two weeks equals an APR near 391%. If you cannot repay on time, you may roll the loan over and pay the fee again, quickly exceeding the original amount borrowed.
Lower-cost alternatives
Credit unions offer payday alternative loans with capped rates. You can also ask your employer about paycheck advances, negotiate payment plans with creditors or utilities, use a small personal loan or tap an emergency fund. Community assistance organizations may help with rent or utility emergencies.
Protecting yourself
Check that any lender is licensed in your state. Read the full cost in dollars. Many states cap rates or ban payday lending. If you are in trouble, a nonprofit credit counselor can help you build a plan without selling you another loan.
Try the numbers
Use our APR Calculator to see this in practice. With its default example (Loan amount: $25,000; Stated interest rate: 9%; Term (months): 60), it shows apr: 10.31%. Adjust the inputs to match your situation.
Key takeaways
- Payday loan APRs can be several hundred percent.
- Credit unions and employers may offer cheaper options.
- Never borrow without seeing the full cost in dollars.
This article is for general education and is not personalized financial, tax or legal advice. Rules and limits change; confirm current figures with official sources such as IRS.gov, SSA.gov and StudentAid.gov, or consult a qualified professional. © 2026 FinanzCalc.