When to Run Trap Detector
Six loan formats where the advertised number is not the real number.
These six loan types are designed so the APR is invisible. Run Trap Detector before you sign any of them.
Legally, lenders only have to disclose APR for "traditional" loans. Six common products skip around the requirement with flat fees, rollovers, or non-loan framing. For each, run the Trap Detector before signing — the advertised fee is almost never the cost.
Quick answer
These six loan types are designed so the APR is invisible. Run Trap Detector before you sign any of them.
Key points
- ▸ Payday loans. Flat fee, 14-day term, rollover common. The "$15 per $100" headline hides a 300–500% APR.
- ▸ Title loans. Secured by the car, usually 30-day term with rollover. Marketed as "you keep the car" — but the APR is the same trap, and repossession risk is added.
- ▸ Pawn redemption. Not legally a loan; functionally identical. Fee + storage over 30 days usually runs 240–300% APR.
- ▸ Credit-card cash advance. Flat fee (3–5%) plus elevated interest (25–30%) from day one, no grace period. Effective APR for a short borrow is 50–80%.
- ▸ Buy-now-pay-later late fees. Principal is interest-free until you miss once. Miss on a $40 installment with a $7 late fee, 2-week grace: APR ~228%.
- ▸ Rent-to-own. Weekly payments on appliances/furniture, flat markup. Total paid is often 2–3× retail over a year — implied APR of 100–200%.
Examples
- Title loan trap$1,000 loan, $250 fee, 30 days. APR = (250/1000) × (365/30) × 100 = 304%. Miss payment → repossession, adding towing/storage fees to the principal before the next 30-day cycle.
- Cash advance reality$500 advance, $25 fee, 25% APR from day 1. 14-day hold: cost = 25 + (500 × 0.25 × 14/365) = $29.80. Effective APR = (29.8/500) × (365/14) × 100 = 155%.
- BNPL miss$200 purchase, four $50 installments. Miss one: $7 late fee. APR on the missed installment over 2 weeks: (7/50) × (365/14) × 100 = 365%.
When to use which tool
- Trap DetectorBefore signing any of the six loan types above. Also before any rollover — the APR is recomputed at each extension.Compute the true APR of a payday loan, pawn redemption, or cash advance — with a predatory heatmap from fair to extortionate.
- Bill TriageIf a loan is being taken to cover a bill, triage first — you may not need the loan at all.When you can't pay everything, which bill first? Weighted ranking by service-cutoff risk and late-fee pain.
- Liquid ValueBefore pawning anything, check the replacement-penalty math.Should you sell an asset to avoid a late fee? Replacement penalty vs fee avoided — equity loss meter.
Related
- Trap DetectorCompute the true APR of a payday loan, pawn redemption, or cash advance — with a predatory heatmap from fair to extortionate.
- Bill TriageWhen you can't pay everything, which bill first? Weighted ranking by service-cutoff risk and late-fee pain.
- Liquid ValueShould you sell an asset to avoid a late fee? Replacement penalty vs fee avoided — equity loss meter.
- What Trap Detector CalculatesConvert a flat-fee short-term loan into the APR it actually represents.
- Five Trap Detector MistakesThe errors that let a 400% loan look like a 15% one.
Frequently asked questions
› Aren't some of these rates capped by state law?
Sometimes — and the caps are still brutal (many states cap payday APR at 400–600%). State caps don't protect you; they only mark the ceiling of legal extortion.
› Is any short-term loan ever reasonable? Trust & accuracy
A credit-union PAL (payday alternative loan) runs 18–28% APR and is designed to fill the same gap. That's the benchmark — anything above is the trap.
› 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.