A payday loan is a short-term loan that can help you meet your immediate cash needs until you receive your next paycheck. These small, high-cost loans typically charge triple-digit annual percentage rates (APR), and payments are usually due within two weeks or close to your next payday. A payday loan is a type of short-term loan in which a lender will provide high-interest credit based on your income. Usually, your equity is a part of your next paycheck.
Payday loans charge high interest rates for immediate short credit. They are also called cash advance loans or check advance loans. Payday loans are usually fast cash for small amounts that need to be repaid in a single payment. If they are not fully refunded by the due date, additional fees are usually charged and the due date is extended.
This can lead to a vicious cycle of reactivation over and over again, incurring more and more commissions every time. Some payday lenders also offer longer-term payday installment loans and request authorization to electronically withdraw multiple payments from the borrower's bank account, which are usually due on each payment date. In fact, the CFPB found that 20% of payday borrowers defaulted on their loans, and more than 80% of payday loans contracted by borrowers were extended or re-borrowed within 30 days. Depending on where you live, you can get a payday loan online or through a physical branch with a payday lender.
Payday loans are made at payday loan stores or at stores that sell other financial services, such as check cashing, title loans, rent-to-own, and pawns, depending on state licensing requirements. Because payday lenders often don't perform a credit check, applying for a payday loan doesn't affect your credit score or show up on your credit report. Each state has different laws regarding payday loans, even if they are available through a payday lender in a store or online. According to the Consumer Financial Protection Bureau, online payday loans tend to have equal or higher fees than store payday loans.
Expanded MLA protections include a 36% Military Annual Percentage Rate (MAPR) cap for a wider range of credit products, including payday loans, vehicle title loans, application loans, deposit advance loans, installment loans and lines of credit open without warranty. You may think that a payday loan is the only solution to handling an emergency bill, or even to pay off another debt, but the truth is that a payday loan will end up costing you more than the problem you are trying to solve.