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How A Payday Loan Can Encourage Holiday Fees

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Finding Credit score to obtain more Consumer credit.

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For a $15 charge on a $100 2-week payday loan, the annual percentage rate is 26 × 15% = 390%; the usefulness of an annual rate (such as an APR) has been debated because APRs are designed to enable consumers to compare the cost of long-term credit and may not be meaningful in cases where the loan will be outstanding for only a few weeks. Nevertheless, careful scrutiny of the particular measure of loan cost quoted is necessary to make meaningful comparisons.[citation needed]

In practice, consumers do not find value in either APR or EAR, but rely on the flat pricing signal in dollars and cents when determining whether or not to use a payday loan.[4]

Payday loans carry substantial risk to the lender; they have a net default rate of 6%,[5] and according

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