A payday loan is a small, short-term loan that a borrower intends to repay on his or her next payday. This type of loan may also be called a cash advance or a payday advance loan.
Low-income people often turn to this type of loan if they need money quickly for unplanned expenses such as car repairs, prescriptions, or higher-than-usual utility bills. It's fairly easy to get a short-term loan, but you may end up paying fees and interest that add up to an annual percentage rate of more than 400 percent. In contrast, the average rate for credit cards in the United States is less than 15 percent.
Payday lending is currently legal in 37 states.
Information for Consumers
- Alternatives to Payday Loans - Center for Responsible Lending
- Payday Loans Don't Pay - AARP - February 2009
Facts on Payday Loans
- Payday Lending Overview - Center for Responsible Lending
- Payday Lending: How the Debt Trap Catches Borrowers - Center for Responsible Lending
- Current State Payday Lending Laws - National Conference of State Legislature
- Payday Loan Consumer Information - Consumer Federation of America
- Congress to Cap Interest Rates on Consumer Loans - 6/5/09
- It Costs More to Be Poor - 5/18/09
- Congress should cap interest rates: Survey confirms public support for cracking down on high-cost lending - Report - Center for Responsible Lending - March 2009
- Payday Loans Put Families in the Red - Center for Responsible Lending - February 2009
- Springing the Debt Trap - Center for Responsible Lending - December 2007