How this calculator works
A payday loan charges a flat fee for a short period rather than a monthly interest rate. To compare it with other borrowing, the fee is expressed as an annualized percentage rate: the cost of the loan for its term, scaled to a 365-day year. This is the simple annualization used in payday-loan disclosures and by consumer regulators; it ignores compounding, which makes it comparable to, but not identical with, a card or instalment-loan APR. In Canada, payday lenders must be licensed and the criminal rate of interest applies, so availability and cost vary by province.
Formula
Period rate = finance charge / amount borrowed. APR = period rate × 365 / term days. Total to repay = amount + finance charge. Cost per $100 = period rate × $100.
Worked example
Borrowing $500 for 14 days with a $75 fee costs 15% for the period. Annualized over 365 days, that is 391.07%. The total to repay is $575, and the cost per $100 borrowed is $15.00.
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Frequently asked questions
Why is the annualized rate so high?
Because a fee that looks modest for two weeks would be charged many times if the same arrangement ran all year. The annualized figure is a comparison tool, not the amount you actually pay if you repay on time.
What if I roll the loan over?
A rollover adds another fee without reducing the principal, so the effective cost rises sharply. This calculator models a single term only; it does not add rollover fees.
Is this the same APR as on a credit card statement?
No. Card APR follows a statutory formula that includes the timing of payments. The payday figure here is a simple annualization of a single flat fee, which is the convention used in payday disclosures.
Are payday loans legal in Canada?
They are legal where a provincial licence exists and the cost stays below the criminal rate of interest. Rules on rollovers and cooling-off periods differ by province.