Payday Loan Calculator

What this calculator does

This calculator converts the charge on a high-cost short-term loan into an effective annual rate, alongside the fee for the loan itself and what it would cost across a year of repeated borrowing. Enter the amount, the total charge, and the term in days.

In the UK this product sits inside a strict FCA price cap introduced in 2015: 0.8 percent per day of the amount borrowed, a £15 ceiling on default charges, and an absolute cap of 100 percent of the sum borrowed on total interest, fees, and charges combined. Those three limits mean UK payday borrowing, while expensive, cannot spiral in the way it does in less regulated markets.

When to use it

Run it before agreeing to a loan, primarily to check the lender is charging within the cap. Divide the total charge by the amount borrowed and by the number of days — if that exceeds 0.8 percent, the loan breaches FCA rules and you should not take it.

The comparison is the second use. A credit union loan is capped at 3 percent a month, equivalent to 42.6 percent APR, and most credit unions will lend small sums to members within days. An arranged overdraft sits near 39.9 percent. Putting those beside a short-term loan's effective rate usually makes the decision straightforward, and the annual repeat-borrowing figure shows what the cycle costs if the shortfall recurs.

Understanding the inputs

Loan amount is the cash advanced to you. Finance fee is the total interest and charges for the period — at the FCA cap this cannot exceed 0.8 percent of the amount borrowed for each day of the term, so £300 over 30 days is capped at £72.

Loan term in days determines both the cap and the annualised figure. UK high-cost short-term credit has largely moved from single-repayment loans towards three to six-month instalment products, so terms of 30, 60, or 90 days are now more common than the traditional fortnight. A shorter term at the same charge always produces a higher annualised rate.

How is this calculated?

APR = (Fee / Loan Amount) × (365 / Days) × 100. Total Repayment = Loan Amount + Fee.

A worked example

Take £300 borrowed for 30 days at the maximum permitted rate of 0.8 percent per day. The charge is £72, so you repay £372. Expressed as a simple annualised rate that is around 292 percent; using the FCA's compounding APR formula the same loan is advertised at roughly 1,270 percent.

Now suppose you cannot repay and the debt runs on. Interest keeps accruing at 0.8 percent a day, and a £15 default charge may apply — but the total cost cap stops everything once charges reach £300. The absolute maximum you can ever repay on that £300 loan is £600. The same £300 from a credit union at 3 percent a month over six months would cost around £30.

Limitations and assumptions

The calculator uses a simple annualisation rather than the compounded APR formula the FCA requires lenders to advertise, so the figure it shows will be far lower than the rate on the lender's own paperwork. Both are describing the same loan; the simple figure is more intuitive over short terms and the compounded one is the regulatory standard.

It models a single-period loan and does not apply the 100 percent total cost cap to the rollover projection, so that annual figure can exceed what a UK lender could lawfully charge on one loan. It also excludes the £15 default charge. If repeat borrowing has become normal, free advice from StepChange or National Debtline is a more useful next step than another loan.