A $300 loan for 14 days costs $45. The lender calls that 15%. The contract says APR 391.07%. Neither number is wrong – they answer different questions. The 15% is what the fee costs for two weeks. The loan APR (annual percentage rate) is the same cost stretched to a full year, so a two-week loan, a one-month loan and a six-month loan can be measured on one scale.
Short answer: APR is the yearly cost of credit, fees included, as a percentage of the amount you borrow. For a loan repaid in one payment, APR = (fee / amount borrowed) × (365 / loan term in days) × 100. For a loan repaid in parts, the lender works out the APR with the actuarial method set by federal rules; below you will see how to estimate it by hand and where to find the exact figure in your agreement.
The examples use the fee limits of South Carolina, Alabama and Virginia. Figures based on state law as of September 2026; they show how the math works and are not an offer from any lender.
What Loan APR Means (and What It Does Not)
APR in One Sentence
APR is “a measure of the cost of credit, expressed as a yearly rate, that relates the amount and timing of value received by the consumer to the amount and timing of payments made.” – Regulation Z, 12 CFR 1026.22(a)(1)
In plain terms, APR turns the cost of a loan into a yearly rate so you can compare loans of different lengths. It looks at two things: how much you receive and when, and how much you pay back and when. A loan that costs $45 over 14 days and one that costs $45 over 31 days have the same price in dollars but very different APRs, because one keeps the lender’s money out for more than twice as long.
Payday loans are not an exception. Federal rules treat a cash advance given in exchange for a borrower’s check as credit under the Truth in Lending Act, whatever name state law gives it (Regulation Z, Official Interpretation 2(a)(14)-2). That is why a payday lender has to disclose an APR even when the price is quoted as “$15 per $100”.
APR vs Interest Rate vs Flat Fee vs Finance Charge
Four terms show up on loan offers and agreements, and they describe the same loan from different angles. The CFPB puts the first two this way: “A loan’s interest rate is the cost you pay to the lender for borrowing money. The Annual Percentage Rate (APR) is a measure of the interest rate plus the additional fees charged with the loan” (CFPB). Here is how all four look on the $300, 14-day South Carolina loan from the opening:
| Term | What it measures | $300 for 14 days, South Carolina |
|---|---|---|
| Flat fee | A one-time charge, often quoted per $100 or as a percentage of the amount | 15% of the amount ($15 per $100) |
| Finance charge | The cost of credit in dollars (12 CFR 1026.4(a)) | $45 |
| Interest rate | The price of borrowing the money, before other fees | No separate interest charge in this example; the whole cost is the fee |
| APR | Interest plus fees, as a yearly rate | 391.07% |
What Counts Toward APR and What Does Not
APR is built on the finance charge. Regulation Z defines it as “the cost of consumer credit as a dollar amount”, including any charge the lender imposes as a condition of giving you credit: interest, service and transaction charges, loan fees (12 CFR 1026.4(a)-(b)). If a fee is part of the price of getting the loan, it belongs in the APR.
A late fee for an actual, unplanned late payment is excluded (12 CFR 1026.4(c)(2)). APR assumes you pay on schedule, so it says nothing about what paying late costs. That charge sits on a separate line of the agreement, under late payment, and you have to read it there.
Active-duty service members and their dependents are covered by a separate measure, the Military Annual Percentage Rate (MAPR). It is capped at 36% and includes some fees that Regulation Z leaves out of the finance charge (32 CFR 232.4).
How to Calculate APR on a Short-Term Loan, Step by Step
The One Method Used in This Guide
Every example below uses the same idea: APR is the cost of credit for one period, as a percentage of the amount borrowed, multiplied by the number of such periods in a year. For a loan repaid in one payment, the period is the loan term itself. For a loan repaid in parts, the period is usually one month, and the monthly rate has to be solved for – that case is covered in the installment section further down.
For a single-payment loan, the formula is:
APR = (finance charge / amount borrowed) × (365 / loan term in days) × 100
Assumptions used in every example: a year of 365 days; percentages in the steps rounded to two decimals; dollar amounts to the cent. Federal rules let a disclosed APR differ from the exact figure by up to 1/8 of a percentage point for a regular loan (12 CFR 1026.22), so treat every result here as approximate. The APR on a specific loan is the one in the lender’s disclosure before you sign.
You will see 390%, 391% or “almost 400%” quoted for the same two-week loan – same loan, different rounding.
Example 1 – $300 for 14 Days in South Carolina
South Carolina law sets the payday fee at 15% of the principal (SC Code 34-39-180(E)), allows loans of up to $550, not counting the fee, for up to 31 days and does not allow rollovers (South Carolina Department of Consumer Affairs). Take a $300 loan for 14 days:
- Fee in dollars: 15% × $300 = $45. This is the finance charge. You repay $300 + $45 = $345 in one payment.
- Rate for one period: $45 / $300 = 15% for 14 days.
- Periods in a year: 365 / 14 = 26.0714.
- APR: 15% × 26.0714 = 391.07% – about 391%.
A common mistake is to divide the total cost by the amount borrowed and stop there: $45 / $300 × 100 = 15%. That is the share of the fee for 14 days, not the APR. APR is a yearly rate, so the 14-day figure has to be scaled to a year (× 365 / 14), which gives about 391%.
Same Loan, Longer Term: Why APR Falls but the Fee Does Not
In both South Carolina and Alabama the fee is a fixed share of the amount borrowed, so it does not grow with the term. The APR does change, because a longer term means fewer periods in a year (365 / 31 = 11.7742 instead of 26.0714):
| Loan | Term | Fee (finance charge) | Total to repay | APR |
|---|---|---|---|---|
| South Carolina, $300 | 14 days | $45.00 | $345.00 | 391.07% |
| South Carolina, $300 | 31 days | $45.00 | $345.00 | 176.61% |
| Alabama, $500 | 14 days | $87.50 | $587.50 | 456.25% |
| Alabama, $500 | 31 days | $87.50 | $587.50 | 206.05% |
APR depends on the term; the dollars do not. The 31-day loan shows a lower APR, but it costs exactly the same in dollars – you simply keep the money longer for the same fee.
Example 2 – $500 for 14 Days in Alabama
Alabama law sets the fee at $17.50 per $100, allows terms of 10 to 31 days and caps the total you can owe across all payday lenders at $500, checked through a statewide database (Alabama State Banking Department). For a $500 loan over 14 days:
- Fee in dollars: $17.50 × 5 = $87.50. You repay $587.50.
- Rate for one period: $87.50 / $500 = 17.5% for 14 days.
- Periods in a year: 365 / 14 = 26.0714.
- APR: 17.5% × 26.0714 = 456.25% – about 456%, the APR of a 14-day loan at the fee limit in Alabama law (17.5% of the amount, Ala. Code 5-18A-12 and 5-18A-13).
Rollover rules also differ by state: South Carolina does not allow them, Alabama allows one at most, after which the loan must be repaid in full. If a loan is extended, look at the new cost disclosed in the agreement rather than assuming it stays the same.
Run Your Own Numbers
You need three numbers from the offer or agreement:
- Fee – the finance charge in dollars;
- Amount – how much you borrow;
- Days – the loan term.
Then: APR = fee / amount × 365 / days × 100. This works for loans repaid in one payment. For loans repaid in parts, use the method in the next section.
The formula also works in reverse, from APR to dollars: dollars = amount × APR × days / 365. Check with Example 1: $300 × 391.07% × 14 / 365 = $45.00.
Why a Two-Week Fee Becomes a Triple-Digit APR
The fee does not change; only the yardstick does. The shorter the term, the more periods fit into a year and the higher the APR on the same fee. That is why payday loans show triple-digit APRs while the fee in dollars looks modest.
APR is a ruler for comparing loans of different lengths. It is not the bill.
Do You Actually Pay 400%?
No. On the South Carolina loan from Example 1 you pay $45 on $300, not 391% of $300. The APR would match what you really pay only if you kept borrowing at that same cost, two weeks at a time, for a full year.
Both numbers matter, for different jobs. The APR tells you how this loan compares with other credit. The dollars tell you whether you can repay it from your next paycheck. When a lender says APR does not matter on a short loan because you only pay the fee, half of that is true: you do pay only the fee, but the APR is what shows that the fee is a high price for two weeks of credit.
The CFPB uses the same benchmark: “A typical two-week payday loan with a $15 per $100 fee equates to an annual percentage rate (APR) of almost 400 percent.” Payday loans usually run two to four weeks (CFPB: What is a payday loan?).
Installment Loans: Why the Simple Formula Stops Working
Why Repaying in Parts Changes the Math
With an installment loan, each payment reduces the balance, so you do not owe the full amount for the full term. The simple formula above assumes you do, which is why it does not fit loans repaid in parts. Lenders calculate the APR on these loans with the actuarial method set out in federal rules (Regulation Z, Appendix J): they find the monthly rate at which the payments, fees included, add up to the amount you received, and multiply that rate by 12. You can estimate an installment APR by hand, as shown below, but the figure that counts is the APR in the lender’s disclosure box before you sign.
Example 3 – $500 over 6 Months in Virginia
Virginia’s short-term loans are repaid in installments. State law caps the interest at 36% a year and allows a monthly maintenance fee of the lesser of 8% of the loan amount or $25, with loans of up to $2,500 and terms of up to 24 months (Va. Code 6.2-1816.1 and 6.2-1817; Virginia Bureau of Financial Institutions (SCC)). Take $500 repaid in 6 equal monthly payments, with interest at the 36% cap and the maximum maintenance fee:
- Monthly interest rate: 36% / 12 = 3%.
- Payment for interest and principal: $500 × 0.03 / (1 – 1.03-6) = $92.30 a month.
- Interest over the loan: 6 × $92.30 – $500 = $53.80.
- Maintenance fee: 8% of $500 is $40, which is more than $25, so the fee is $25 a month: 6 × $25 = $150.
- Finance charge: $53.80 + $150 = $203.80.
- Monthly payment with the fee: $92.30 + $25 = $117.30. Total of payments: 6 × $117.30 = $703.80.
- APR: find the monthly rate i at which six payments of $117.30 are worth exactly $500 today, that is, where (1 – (1 + i)-6) / i = $500 / $117.30 = 4.2626.
Trying rates narrows it down:
| Monthly rate tried | (1 – (1 + i)-6) / i | Compared with 4.2626 |
|---|---|---|
| 10.70% | 4.2674 | too high – rate too low |
| 10.80% | 4.2550 | too low – rate too high |
| 10.739% | 4.2625 | ≈ 4.2626, within rounding |
The monthly rate is about 10.739%, so the APR is 12 × 10.739% ≈ 128.9%. To check it in Excel or Google Sheets, enter =RATE(6,-117.30,500)*12; the result is about 1.289, or 128.9%.
The 36% cap in Virginia applies to the interest. The APR in the disclosure box also includes the monthly maintenance fee, which is why it comes out well above 36%. A fee that does not depend on the loan size weighs more on a small loan. An NSF fee of up to $25 may apply if a payment is returned; it is not part of this example. Real contracts may adjust the last payment by a few cents.
Payday vs Installment: Compare the Dollars, Not Only the APR
The Same $500 Three Ways
Here is the same $500 under the rules of three states. In South Carolina the fee is 15% of the amount, so on $500 it is $75 and the APR stays at 391.07% – a percentage fee does not change the APR when the amount changes. $500 is within the South Carolina limit of $550 and equal to the Alabama limit of $500.
| South Carolina payday | Alabama payday | Virginia term loan | |
|---|---|---|---|
| Amount | $500 | $500 | $500 |
| Term | 14 days | 14 days | 6 months |
| Payments | 1 × $575.00 | 1 × $587.50 | 6 × $117.30 |
| Finance charge | $75.00 | $87.50 | $203.80 |
| Total of payments | $575.00 | $587.50 | $703.80 |
| APR | 391.07% | 456.25% | ≈ 128.9% |
Sources: South Carolina Department of Consumer Affairs, Alabama State Banking Department, Virginia Bureau of Financial Institutions (SCC).
How to Read the Table
A lower APR does not mean fewer dollars. The Virginia term loan has the lowest APR in the table, ≈ 128.9%, yet it costs the most: $203.80 in finance charges, against $75.00 in South Carolina and $87.50 in Alabama. The payday loans cost less in dollars because the money is out for 14 days, not six months, but they ask for everything back at once: $575.00 or $587.50 in a single payment. The Virginia loan costs more in total and splits it into six payments of $117.30. That is the basic trade-off of installment loans: smaller payments over a longer time, and more dollars overall.
The APR alone will not tell you which shape fits. Compare loans on the same amount and, where you can, the same term, then check which payment fits your budget without borrowing again to cover it. The rules behind each column are on our pages for South Carolina payday loan rules, Alabama payday loan limits and Virginia’s 36% cap plus monthly fee. Personal loans are another option to measure the same way, by APR and by total dollars.
Payday loans are not available in every state. Before comparing offers, check the page for your state in the payday loans section to see what your state’s law allows.
Where to Find the APR in Your Loan Agreement
The TILA Disclosure Box, Field by Field
Under the Truth in Lending Act, a lender must show the key cost terms of a closed-end loan in writing, grouped together and set apart from the rest of the contract. These are the fields defined in 12 CFR 1026.18, with the values for the $300 South Carolina loan from Example 1:
| Field | What it means | Example 1, South Carolina |
|---|---|---|
| Amount financed | “The amount of credit provided to you or on your behalf” | $300.00 |
| Finance charge | “The dollar amount the credit will cost you” | $45.00 |
| Annual percentage rate | “The cost of your credit as a yearly rate” | 391.07% |
| Payment schedule | Number, amounts and timing of payments | 1 payment of $345.00, due in 14 days |
| Total of payments | “The amount you will have paid when you have made all scheduled payments” | $345.00 |
| Late payment | What the lender charges if a payment is late | As stated in the agreement; not included in the APR |
| Prepayment | Whether a penalty applies or part of the finance charge is refunded if you repay early | As stated in the agreement |
The finance charge and the APR must be “more conspicuous than any other disclosure, except the creditor’s identity”, and the lender must give you the disclosures before the loan is consummated – in practice, before you sign (12 CFR 1026.17). Until you have seen these two numbers, you have not seen the price of the loan.
Check the Math in One Minute
- Divide the finance charge by the amount financed: $45 / $300 = 15%.
- Multiply by 365 and divide by the term in days: 15% × 26.0714 = 391.07%.
- Compare the result with the APR in the box. A difference of a fraction of a percentage point is rounding. A larger gap is a reason to ask the lender what the finance charge includes.
For an installment loan the one-line formula does not apply. Check instead that the total of payments equals the payment times the number of payments (6 × $117.30 = $703.80 in Example 3) and that the finance charge equals the total of payments minus the amount financed ($703.80 – $500 = $203.80). To estimate the APR itself, use the RATE check from Example 3.
Before You Sign: A Short Checklist
- APR and finance charge. Find both in the disclosure box and run the one-minute check above.
- Total of payments. Look at the dollar amount you will pay back in total, not only the size of each payment.
- Late payment and prepayment lines. Late fees are not part of the APR, so read what a late or missed payment costs and what happens if you repay early.
- The lender’s license. Check the lender with your state regulator and in NMLS Consumer Access.
- The payment against your budget. Make sure the payment, or the full amount on a single-payment loan, fits your next paycheck without a new loan to cover it.
Frequently Asked Questions
APR, or annual percentage rate, is the yearly cost of a loan, fees included, as a percentage of the amount you borrow. It puts loans of different lengths on one scale so you can compare them. For example, a $45 fee on a $300 loan for 14 days in South Carolina equals an APR of about 391%.
No. The interest rate is the price of borrowing the money. APR is a yearly measure of the interest rate plus the other fees charged with the loan, so it is usually higher. On a fee-based payday loan, such as $300 for 14 days in South Carolina, the whole cost is a $45 fee and the APR is 391.07%.
For a loan repaid in one payment, divide the fee by the amount borrowed, multiply by 365, divide by the term in days and multiply by 100. For $300 over 14 days with a $45 fee: $45 / $300 × 365 / 14 × 100 = 391.07%. Loans repaid in parts need the actuarial method, so a hand calculation is only an estimate.
Because APR is a yearly rate. A 14-day term fits into a year 26.0714 times, so a 15% fee for two weeks becomes 15% × 26.0714 = 391.07% a year. The same $45 fee over 31 days gives an APR of 176.61%. The dollars stay the same; only the number of periods in a year changes.
No. On a $300 South Carolina loan for 14 days you pay a $45 fee, not 391% of $300. The APR matches your real cost only if you keep borrowing at that price for a full year. Use the APR to compare loans and the dollar total to plan your budget. If a loan is extended, check the new cost the lender discloses.
Yes, fees you pay as a condition of getting the loan. APR is built on the finance charge, which under Regulation Z includes interest, service and transaction charges and loan fees. Late fees for an actual late payment are excluded, so APR does not show what paying late costs. Look for that on the late payment line of your agreement.
In the Truth in Lending disclosure, a group of terms set apart from the rest of the contract. It lists the amount financed, finance charge, APR, payment schedule and total of payments. Federal rules require the finance charge and APR to stand out more than any other disclosure, and the lender must give you the disclosure before you sign.
Use the same amount and compare the finance charge and the total of payments. On $500, a 14-day South Carolina payday loan costs $75.00 (APR 391.07%), while a six-month Virginia term loan costs $203.80 (APR ≈ 128.9%). The payday loan costs less in dollars but needs $575.00 back at once; the Virginia loan spreads $703.80 over six payments.
Sources and How These Numbers Were Built
- Regulation Z, 12 CFR 1026.22 – Determination of annual percentage rateconsumerfinance.gov
- Regulation Z, 12 CFR 1026.4 – Finance chargeconsumerfinance.gov
- Regulation Z, 12 CFR 1026.17 – General disclosure requirementsconsumerfinance.gov
- Regulation Z, 12 CFR 1026.18 – Content of disclosuresconsumerfinance.gov
- Regulation Z, Appendix J – Annual percentage rate computations for closed-end creditconsumerfinance.gov
- Regulation Z, Official Interpretation of 1026.2 (comment 2(a)(14)-2)consumerfinance.gov
- CFPB: What is a payday loan?consumerfinance.gov
- CFPB: What is the difference between a loan’s interest rate and its APR?consumerfinance.gov
- 32 CFR 232.4 – Military Lending Act, terms of consumer creditecfr.gov
- South Carolina Department of Consumer Affairs (SC Code 34-39-180)consumer.sc.gov
- Alabama State Banking Departmentbanking.alabama.gov
- Virginia Bureau of Financial Institutions (SCC) (Va. Code 6.2-1816.1 and 6.2-1817)scc.virginia.gov
- NMLS Consumer Accessnmlsconsumeraccess.org
Method: state parameters from state law as of September 2026; a 365-day year; percentages rounded to two decimals in the steps, dollars to the cent; installment figures calculated from the rounded monthly payment. Examples are illustrative.
MaybeLoan is a loan comparison service, not a lender. We do not make loans or credit decisions. The APR and terms of any loan you are offered are set by the lender and shown in its Truth in Lending disclosure before you sign. Payday loans are not available in every state.
If you are weighing a short-term loan, our payday loans guide and installment loans page explain how each type works. Whichever you consider, check the lender’s license with your state regulator and read the APR in the disclosure before you sign.
