Five Trap Detector Mistakes

The errors that let a 400% loan look like a 15% one.

These mistakes all undercount the real APR. Fix them before you trust the number.

The math is not the hard part. The hard part is whether you entered the right numbers. These five mistakes all bias the APR lower than reality, which is how people sign for one loan and end up owing three.

Quick answer

These mistakes all undercount the real APR. Fix them before you trust the number.

What you are trying to do

The errors that let a 400% loan look like a 15% one.

Best next step

Trap Detector

Limit to remember

Treat this as a practical aid for the task, not a replacement for professional judgment.

Key points

▸ Forgetting rollovers. If the 14-day loan has been rolled twice, the actual term is 42 days and the fee has tripled. Recompute after each rollover — and if the lender rolls by default, enter the worst case.
▸ Skipping add-on fees. Processing fee, convenience fee, "optional" insurance, document prep. They all inflate Total Cost. If it's on the receipt, it's part of the APR.
▸ Using stated term, not actual term. "14 days" is the best-case; the real term is how long until you truly clear it. If you expect to roll once, enter 28 days and the real Total Cost.
▸ Mis-annualizing. Some calculators divide by 12 instead of 365/days. That flatters short-term loans by 30×. APR is always annualized from the days you actually have the money.
▸ Ignoring the second loan. When a storefront sells a "loan to pay off the first loan," the true cost is both loans stacked. Compute APR on the combined principal and total fees.

Examples

Rollover undercount

Original: $100, $15 fee, 14 days → 391% APR. After 2 rollovers (42 days, $45 total fees): (45/100) × (365/42) × 100 = 391% — same APR, but now $45 out of pocket instead of $15. People forget it scaled.
Skipped add-on

Stated: $200 loan, $30 fee, 30 days → 182% APR. Add $15 "optional" insurance: total $45. Real APR = 274%. The add-on was 50% of the stated fee.
The second loan

First loan $200 @ 300% APR unpaid. New loan $250 pays off first + fees. True cost = both fee stacks on the compounded principal. Often 500%+ effective.

When to use which tool

Frequently asked questions

› What if the lender won't itemize fees?

Subtract amount-in-hand from total-owed-at-maturity — that's total cost, regardless of what they call it. Lenders who won't itemize are definitionally hiding something.

› Does APR matter if I'll pay it off tomorrow?

Yes — the APR is the honest comparison against other credit. If you genuinely pay tomorrow, cost-per-day is the better number, but APR still tells you whether the lender is fair or predatory.

› How should I use a decision framework in real life? How-to

Use a decision framework to expose the tradeoff, not to outsource the decision. Write down the inputs, compare the output with your constraints, then ask what would change the answer. The strongest use is scenario testing: base case, conservative case, and failure case.

› Is this financial, legal, or tax advice? Trust & accuracy

No, this is not legal, financial, tax, medical, or professional advice unless the page explicitly says that use case is supported. It organizes assumptions so you can inspect them. Verify high-stakes choices with qualified people who can review facts, contracts, regulations, and downside risk.

› What assumption matters most in a decision model? Edge case

The most important assumption is usually the one you are least certain about and most emotionally attached to. Change that input first. If the recommendation flips after a small change, the decision is fragile and needs more evidence before you treat the model as useful.