Is a payday loan variable or fixed rate?

Quick Answer A payday loan typically has a fixed interest rate. This means that the interest rate remains the same. It doesn't change based on market conditions or other factors. So, you know exactly how much interest you'll be charged when you take out the loan and how much you'll need to repay.

Tobi Opeyemi Amure profile picture
Tobi Opeyemi Amure • Answer updated on Jul 9, 2023

Fact checked by Dwayne Dumesle

Payday loans come with a fixed interest rate.

This means the rate doesn't fluctuate during the short lifespan of the loan, typically until your next payday (usually two weeks). But, what does this mean for you as a borrower?

Let's explore. 💰

In the world of payday loans, predictability is the name of the game. From the start, you know exactly what you're signing up for. Let's say you borrow $300, and the lender charges $15 per $100. Your total repayment is going to be $345, no ifs, ands, or buts about it.[1]

Learn: How much would a $500 payday loan cost?

The amount you take remains constant and doesn't increase or decrease, regardless of any changes in the economy during the term of your payday loan.

This makes payday loans seem simple, right? You borrow a bit; you pay a bit extra. But let's look a little closer. 🕵️‍♀️

When you spread out those charges over a year (like with the APR of most loans), you're looking at some seriously high numbers. We're talking hundreds of percent here — 400% or more, to be precise.

Why? Great question. This happens because payday loans are super short-term, usually about two weeks. But you calculate the APR as if they lasted a year.

So, while the APR might seem like some boring finance term, it's actually a pretty handy tool. It helps you compare the costs of different loans in a standard way.[2] So cool everyone. Really, so cool. 🤓

Learn: What do I need for a payday loan?

The fixed rate of a payday loan seems simple, but it can be a slippery slope because of the high costs, especially if you can’t pay it back on time. Always check out your other options first. And, if you do go for a payday loan, make sure you can pay it back on time to avoid any rollercoaster debt rides.


  1. What is a payday loan? ↩︎

  2. Annual Percentage Rate (APR): What It Means and How It Works ↩︎

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