Is there an easy way to calculate what a loan will cost?
Here is a simple method of estimating how much a payday loan will cost, including the total annual cost shown as a percentage of the amount borrowed.
First: Formulate the amount of interest you will pay. To do this, learn what annual interest rate you will be charged for your loan. Next, divide the annual interest rate by 365 (days). This will give you the daily interest rate on your loan. Then, multiply the daily interest rate by the amount of days you have to repay your loan. Lastly, multiply this number by the amount of money you are borrowing (in dollars).
Second: Now you need to determine the amount of fees that may be included with your loan. Once you know the total amount of fees you will be charged, you should add this number to the total amount of the loan which you calculated above.
Third: Here’s how to calculate the annual cost of your loan, indicated as a percentage of the total amount borrowed. Take the total cost of your loan (interest plus fees) and divide it by the amount of money you are borrowing. Then take this number divide it by however many days you have to repay the loan. Finally, multiply this number by 365 (days in a year).
Here’s an example of a payday loan cost calculation:
Let’s assume that you are taking out a payday loan in the amount of $300. You will have a repayment period of 14 days. Your contract indicates that the lender will charge you $50 in additional fees and interest. This is how you would calculate the annual cost of your loan.
This formula estimates that the total cost of your payday loan will be $50. Your annual percentage rate (APR) calculates to 435%.