FAQ

A payday loan is a short-term, high-interest loan that is typically repaid on the borrower's next payday. Payday loans are often used by people who need money quickly to cover unexpected expenses, such as car repairs or medical bills.

Payday loans are typically small, with loan amounts ranging from \$100 to \$1,000. The interest rates on payday loans are very high, often as high as 400% APR. This means that for every \$100 you borrow, you could end up paying \$400 in interest and fees.

Payday loans are also very short-term, with repayment terms typically ranging from 14 to 30 days. This means that borrowers must have the money to repay the loan on their next payday, or they will face additional fees and penalties.

Here's how a payday loan works:

• The borrower applies for a loan at a payday lender.
• The lender assesses the borrower's creditworthiness and may require them to provide proof of income and employment.
• If the borrower is approved for a loan, they will be required to sign a promissory note. The promissory note is a legal document that outlines the terms of the loan, including the amount of the loan, the interest rate, and the repayment terms.
• The lender will then give the borrower the money in cash or by depositing it into their bank account.
• The borrower is then required to repay the loan, plus interest and fees, on their next payday.
• If the borrower is unable to repay the loan on their next payday, they may be able to extend the loan for another period of time. However, this will usually involve paying additional fees.

Payday loans differ from other types of loans in several ways:

• Loan amount: Payday loans are typically small, with loan amounts ranging from \$100 to \$1,000. Other types of loans, such as personal loans and car loans, can have much higher loan amounts.
• Interest rates: The interest rates on payday loans are very high, often as high as 400% APR. This means that for every \$100 you borrow, you could end up paying \$400 in interest and fees. Other types of loans, such as personal loans and car loans, typically have much lower interest rates.
• Repayment terms: Payday loans are very short-term, with repayment terms typically ranging from 14 to 30 days. Other types of loans, such as personal loans and car loans, typically have longer repayment terms.
• Credit requirements: Payday lenders typically do not require good credit to qualify for a loan. Other types of loans, such as personal loans and car loans, may require good credit or a cosigner.
• Fees: Payday lenders may charge a variety of fees, such as origination fees, late fees, and over-the-limit fees. Other types of loans may also charge fees, but the fees are typically lower than the fees charged by payday lenders.

There are a few reasons why the annual percentage rates (APRs) on payday loans get to be so high.

• Short-term loans: Payday loans are typically very short-term loans, with repayment terms ranging from 14 to 30 days. This means that the lender has to recoup their money quickly, which leads to higher interest rates.
• High fees: Payday lenders typically charge a variety of fees, such as origination fees, late fees, and over-the-limit fees. These fees can add up quickly and make the loan even more expensive.
• High-risk borrowers: Payday lenders typically lend to borrowers who have poor credit or no credit history. These borrowers are considered to be a higher risk, so the lender charges a higher interest rate to compensate for the risk.
• State regulations: Some states have regulations that limit the interest rates that payday lenders can charge. However, many states do not have these regulations, which allows payday lenders to charge very high interest rates.