Features
Part of Fintech lending guide: from application to payoff
Reconstructing the true cost of a short-term digital loan case
Short-term digital loan case reconstructing net proceeds, finance charge, APR disclosure, failed debit, extension, refinance, cumulative cost, and payoff.
What to take away
- Start with net cash received, not the headline advance.
- Separate lender charges, bank charges, extensions, and replacement-loan costs.
- A new contract can make an old balance look like fresh principal.
- Reconstruct each event from agreements, bank records, and servicing entries.
- The final answer needs scheduled cost, actual cost to date, remaining balance, and payoff path.
This fictional case demonstrates accounting, not a recommendation. The lender, borrower, dates, terms, and amounts are invented. State law and product coverage can change the analysis of a real loan.
The offer
Jordan needs $400 for a car repair. A phone app shows:
Get $400 today. Repay $460 on your next payday.
The final agreement names Cedar Bridge Credit as the lender. The app is operated by QuickCurrent, which markets and services the loan. The contract calls the $60 a finance charge and lists a 14-day term.
Jordan accepts on May 1. The lender deposits $400. Repayment of $460 is scheduled for May 15 through an authorized bank debit.
Classify before calculating
The contract must be evaluated on its actual terms. The CFPB describes a typical payday loan structure as small-dollar, short-term, high-cost credit often due on the next payday, commonly with automatic repayment authorization. That general description helps identify questions, but it does not decide this fictional product's legal status or state-law treatment.
The starting records are:
Record / Amount
- Contract principal
- $400
- Net proceeds received
- $400
- Finance charge
- $60
- Scheduled payment
- $460
- Original term
- 14 days
No fee was withheld, so contract principal and net proceeds match.
What happened next
Jordan's paycheck is delayed. The repayment account contains $430 on May 15.
| Date | Event | Cash effect | Loan effect |
|---|
Failed debit and extension
- May 1Loan funded, $400
- May 15$460 debit fails
- May 15Bank fee $28
- May 16Extension charge $60
- May 30$460 due under extension
The bank's $28 charge is part of Jordan's actual cash impact but not automatically part of the lender's finance charge. Keep the two categories separate.
Scheduled cost versus actual cost
Under the original schedule:
$460 payment - $400 proceeds = $60 scheduled dollar cost
After the failed debit and extension, Jordan has paid $88 in cash and still owes $460:
$28 bank fee + $60 extension charge = $88 paid outside principal
If Jordan pays $460 on May 30, total cash outflow related to the borrowing event will be:
$28 + $60 + $460 = $548
Net borrowing benefit was $400, so actual cash cost would be $148, subject to how the real agreements and laws classify each amount.
The replacement offer
On May 28, the app offers a replacement:
- new contract principal$520;
- old payoff funded from new loan$460;
- new fee$78;
- cash delivered to Jordan$60;
- new scheduled payment$598 on June 11.
The interface leads with "Get another $60." The accounting is:
$460 old payoff + $60 new cash = $520 new principal
The new $78 charge makes the scheduled payment $598. Jordan would owe more than the original loan even though only $60 of fresh cash arrives.
Cumulative comparison
Option A: pay May 30
| Component | Amount |
|---|---|
| Original proceeds | +$400 |
| Bank fee | -$28 |
| Extension charge | -$60 |
| May 30 payoff | -$460 |
| Net borrowing-related cash cost | $148 |
Option B: refinance and pay June 11
| Component | Amount |
|---|---|
| Original proceeds | +$400 |
| Bank fee | -$28 |
| Extension charge | -$60 |
| New cash | +$60 |
| June 11 payment | -$598 |
| Total cash received | $460 |
| Total cash paid | $686 |
| Net borrowing-related cash cost | $226 |
The refinance does not erase the earlier $60 charge or $28 bank fee. It adds $60 of new liquidity and $78 of new contractual cost in this fictional setup.
Payoff versus refinance cost
Option A: pay May 30
- Original proceeds
- +$400
- Bank fee
- -$28
- Extension charge
- -$60
- New cash
- none
- Final payment
- -$460
- Net cash cost
- $148
Option B: refinance
- Original proceeds
- +$400
- Bank fee
- -$28
- Extension charge
- -$60
- New cash
- +$60
- Final payment
- -$598
- Net cash cost
- $226
APR is not the same as fee percentage
The original charge is 15 percent of $400 in dollar-ratio terms:
$60 / $400 = 0.15
That is not a 15 percent annual percentage rate. A short term annualizes the cost over a year under the applicable formula. The CFPB's payday APR explanation explains why a short-term fee can translate into a much larger APR and recommends using disclosed APR to compare credit products.
For a real case, copy the disclosed APR from the agreement and have any suspected disclosure error reviewed under the governing law. Do not publish an improvised annualization as a legal conclusion.
Evidence reconciliation
Jordan collects:
- Original advertisement screenshot.
- Final agreement and disclosure.
- May 1 deposit record.
- May 15 failed debit record.
- Bank statement showing the $28 charge.
- Extension agreement and $60 payment.
- Current account ledger.
- Replacement offer before acceptance.
- A dated payoff quote.
The app ledger must show whether the extension payment is a fee, interest, principal, or another category. The bank record proves the cash movement but not the contractual application.
Affordability after collection
Jordan's expected May 30 deposit is $1,250. Essential bills due before the next deposit total $910.
Paying $460 would leave:
$1,250 - $910 - $460 = -$120
Refinancing delays payment but creates a $598 obligation. Without another income or expense change, the larger due amount does not repair the shortfall.
A proper review asks what remains the day after repayment, not only whether the debit can clear at one moment.
Account correction check
Assume QuickCurrent's app later displays $658 due, adding another $60 extension charge. Jordan has no second extension agreement.
The investigator should:
- obtain the transaction-level ledger;
- identify the event that assessed the extra charge;
- compare it with authorization and contract terms;
- reverse an unsupported charge;
- recalculate dependent interest or fees;
- correct any collection or reporting record;
- issue a revised statement and payoff.
The screenshot starts the case. The ledger resolves it.
Final case statement
The final report should show four figures separately:
- $60 original scheduled lender cost;
- $88 already paid in extension and bank charges;
- $460 current contractual due amount before any unsupported charge;
- $148 total cash cost if the May 30 payoff is made.
If the refinance is accepted, the report starts a new contract row without deleting the old history.
Common questions
Is the bank's returned-item fee part of the loan finance charge?
Do not assume so. Record it separately and analyze classification under the actual facts and law.
Did the $60 extension reduce principal?
Not in this fictional contract. The evidence says it moved the due date while principal remained $400.
Why not compare only the new $60 cash?
Because the replacement also finances the old payoff and adds a new charge.
What record matters most?
Use the agreements, funding and bank records, payment authorizations, and transaction-level servicing ledger together.
