How much would a $1,000 payday loan cost in total?

Borrowing $1,000 from a payday lender could have a big impact on your finances due to the extra costs and fees these loans come with. Getty Images

In a pinch, a payday loan might seem like the fastest way to get your hands on much-needed cash. Maybe your car broke down, a utility bill is overdue or your rent went up unexpectedly. Whatever the case, the promise of quick money with little paperwork can be hard to resist. And since payday lenders don't typically check credit scores, even borrowers with less-than-perfect credit can qualify in a matter of minutes.

But that convenience generally comes at a steep cost. Payday loans are notorious for sky-high fees and interest rates, trapping many borrowers in a cycle of debt that's tough to break. So, while these loans may be marketed as short-term solutions, the reality is that they can linger on your finances far longer than expected. With inflation squeezing household budgets, though, it may still be tempting to turn to these risky loans just to stay afloat.

So, what does that $1,000 payday loan actually cost once all the fees are added in? Here's what to expect — and why it might be worth exploring other options first.

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How much would a $1,000 payday loan cost in total?

Payday loans don't operate like traditional loans. Instead of charging interest in the usual annual percentage rate (APR) format, lenders often charge a flat fee per $100 borrowed. This fee typically ranges from $10 to $30, and while that might not sound like much, it adds up fast.

Let's say you take out a $1,000 payday loan with a $15 fee per $100 borrowed. That means you'll owe $150 in fees alone, and you'll be expected to repay the full $1,000 principal plus that $150 — or $1,150 total — in just two weeks. That's a 15% fee on your loan, but when annualized, it equates to a nearly 400% APR. 

If you can't repay the full $1,150 on your due date, the cost can climb even higher. Many payday loan borrowers roll their loans over, which means they pay another $150 fee to extend the loan for another two weeks. If this cycle continues, and for many it does, you could end up paying hundreds more in fees without ever making a dent in the original $1,000 balance.

Here's a breakdown of what that could look like:

Initial loan: $1,000Initial fee (at $15 per $100): $150Total repayment due in 2 weeks: $1,150If you roll over once: Another $150 feeTotal owed after one rollover: $1,300If rolled over three times: $1,000 principal + $150 x 4 = $1,600 total owed

In some states, laws limit how many times you can roll over a payday loan. In others, though, there's little to stop lenders from continuing the cycle, especially if borrowers don't know their rights or feel like they have no other options.

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Why payday loans are so expensive — and risky

The high cost of payday loans boils down to their fee structure and short repayment windows. While a $15 fee per $100 borrowed may not seem outrageous at first glance, it translates to a shocking APR when applied to a two-week loan. And lenders don't usually frame it in terms of APR. They frame it in flat fees, which downplays the true expense.

Payday loans also lack the consumer protections built into other forms of credit. Unlike installment loans or credit cards, payday loans typically don't allow partial payments. It's all or nothing when your paycheck hits. That makes it harder to repay, especially if you're juggling rent, groceries or other urgent bills in addition to your payday debt.

That said, some lenders offer what's known as an "installment payday loan," which spreads repayment over a few months. While this may seem like a safer alternative, the APR is often just as high, if not higher, than the original short-term loan. And the longer the term, the more fees and interest pile up.

There's also the risk of overdrafts and bank fees. Many payday lenders require access to your checking account. If the full amount is debited on your payday and your account can't cover it, you'll likely face insufficient funds fees from your bank, adding to the already high costs.

Plus, if you default, the lender may send your account to collections or file a lawsuit, potentially leading to wage garnishment or a court judgment. So, what started as a $1,000 loan could turn into a years-long debt problem.

The bottom line

Knowing the real cost of payday loans before signing the dotted line can help you find a better way forward. A $1,000 payday loan might cost you $1,150 or more within just two weeks, and if you can't repay it right away, that cost could double or triple over time thanks to rollovers and compounding fees. 

Ultimately, payday loans are structured to keep borrowers in debt, not help them escape it, so if you're considering one, it's worth exploring the safer alternatives available to you. After all, short-term financial relief shouldn't come with long-term consequences. 

Angelica Leicht

Angelica Leicht is the senior editor for the Managing Your Money section for CBSNews.com, where she writes and edits articles on a range of personal finance topics. Angelica previously held editing roles at The Simple Dollar, Interest, HousingWire and other financial publications.