09
Apr

# APR Calculator & Fees for Installment and Payday Loans

Real World APR Comparison Chart Payday Loans vs Bank Overdraft APR’s

100 X 365/D X (C/L -1) =APR

Where: D = number of days of loan

C = total cost of loan

L = amount of loan

Typical Payday Loan example:

Client borrows \$100 for 2 weeks (14 days) with a fee of \$17.

100 X 365/14 X (117/100 – 1) = APR

2607.14 X .17 = 443.21 % APR Total cost to client = \$117.00

Another scenario. Client borrows \$100 for 2 weeks (14 days) with a fee of \$75.

100 X 365/14 X (175/100 – 1) = APR

2607.14 X .75 = 1,955.35 % APR Total cost to client = \$175.00

Typical Bank Overdraft example (NSF’s amount to short term, single payment payday loans:

If a bank customer overdrafts their account by \$100 they can be charged a \$35+ Overdraft [NSF] fee for the first day. An Extended Overdrawn fee of \$35 on the sixth day.

100 X 365/6 X (170/100 – 1) = APR

6083.33 X .70 = 4,258.33 % APR Total cost to client = \$175.00

If that same overdraft is for only \$10 (some bank’s minimum):

100 X 365/6 X (80/10 – 1) = APR

6083.33 X 7.0 = 42,583.31 % APR

Total cost to client = \$80.00

According to PEW, when the state of Georgia outlawed payday loans the banks netted 1.4 billion dollars more in overdraft fees the next year.

Typical Late Fee example:

Using a common Water District bill as an example. If a financially strapped consumer is  one day late paying their water bill of \$17.59 a \$5 fee is charged.

100 X 365/1 X (22.59/17.59 – 1) = APR

36500 X .28 = 10,220.00 % APR

Total cost to client = \$22.59

So… Why do banks and credit unions “HATE” payday loan and installment loan lenders? Because payday loans are cheper for the consumer in a short-term financial pinch AND the majority of bank and credit union profits are derived from the NSF fees thaey charge their customers!

According to PEW, The CFPB and The Consumerist:

“In all, the CFPB found that 60 banks derived a significantly higher portion of their overall recurring earnings from consumer overdraft and NSF fees than their peer institutions.”

“Additionally, the fees represented 65.3% of all reported consumer deposit account fee revenues.”

What’s the answer to all this controversy for an entrepreneur? Grab a copy of our “Payday Loan/Installment Loan Manual” [updated 2X per year] and learn how to make money by lending money!

You don’t really want to open a pizza parlor, a florist shop, another taco stand… do you? In the small dollar lending space, your inventory is MONEY! Money does not rot, die, or get thrown in the garbage at the end of the day.

05
Aug

## A payday loan or car title loan company for example?

Don’t overly complicate this.

Start a PDL Company

If they are legal where you live, simply visit a competitor offering the types of loans you would like to offer. Appy for an receive a loan. Borrow the minimum amount; say \$50 – \$100. Get copies of EVERYTHING. All the documents, take a quick picture of the loan charts on the walls. Take note of the licensing authority typically disclosed on the walls of this competitor as well. In the USA, Canada, UK… these consumer disclosures are mandated.

Then, take these docs home and reach out to the licensing authority for details on applying for a license. There is much more to this subject than can be explained here… consider our Payday Loan Startup Manual described here: Payday Loan Business Bible

And, if payday loan or car title loan companies are not legal where you live/work, consider offering them via the Internet. This is not much more challenging than opening a payday loan or title loan store. And of course, we thoroughly teach you how to do this in our “Bible.”

Questions? Jer@PaydayLoanIndustryBlog.com