Short-Term Loan Calculator

What is a Short-Term Loan Calculator?

A Short-Term Loan Calculator is a financial tool designed to help borrowers estimate the repayment amount for short-duration loans, typically ranging from a few days to a few weeks. It takes into account the loan amount, the Annual Percentage Rate (APR), and the loan term in days to provide an accurate estimate of how much you'll need to repay at the end of the term. This calculator is particularly useful for understanding the total cost of borrowing for payday loans, cash advances, and other short-term financial products.

The Short-Term Loan Repayment Formula

The formula used to calculate the repayment amount on a short-term loan is:

\[R = P(1 + r \times t)\]

Where:

• \(R\) = Repayment amount
• \(P\) = Principal (loan amount)
• \(r\) = Daily interest rate (APR / 365)
• \(t\) = Term in days

Step-by-Step Short-Term Loan Repayment Calculation

1. Convert the APR to a daily interest rate: \[r = \frac{\text{APR}}{365}\]
2. Apply the repayment formula: \[R = P(1 + r \times t)\]
3. Calculate total interest: \[\text{Total Interest} = R - P\]

Example Calculation

Let's calculate the repayment amount for a $500 short-term loan with a 400% APR for 14 days:

1. \(r = \frac{400\%}{365} = 1.0959\%\) per day
2. \(R = 500 \times (1 + 0.010959 \times 14) = $576.71\)
3. Total Interest = $576.71 - $500 = $76.71

Visual Representation

This chart shows the proportion of principal ($500) to total interest ($76.71) for the example short-term loan.

Benefits of Using a Short-Term Loan Calculator

• Transparency: Clearly shows the total cost of borrowing, including interest.
• Financial Planning: Helps you understand the repayment obligation and plan accordingly.
• Comparison Tool: Allows you to compare different loan offers by adjusting terms and rates.
• Informed Decision Making: Provides crucial information to help decide if a short-term loan is the right financial move for your situation.

Remember, while this calculator provides a good estimate, actual loan terms may vary. Short-term loans often come with high APRs, so it's crucial to carefully consider alternatives and understand the full cost before borrowing. Always consult with financial professionals and carefully review loan agreements before committing to any short-term loan.