Payday loan

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A payday loan (also called a payday advance) is a small, short-term unsecured loan, which is many cases is scheduled to be repaid on the borrower's next payday.[1][2][3] Sometimes, the loans are also called "cash advances", although that term can also refer to cash provided against a prearranged line of credit such as a credit card. Payday loans are granted after the borrower shows previous payroll and employment records. The legislation regulating payday loans varies widely between different countries and, within the United States, between different states.

Because the loan is not secured by collateral, and the borrowers are typically desperate, the interest rates charged are much higher than other forms of loans.

In the United States, payday lending is legal and regulated in 37 states. In 13 other states, payday loans are either illegal or not feasible, given state law.[4] When not explicitly banned, laws that prohibit payday lending are usually in the form of usury limits: hard interest rate caps calculated strictly by annual percentage rate (APR). Since Oct. 1, 2007 a federal law has capped lending to military personnel at a maximum of 36% APR as defined by the Secretary of Defense.[5]


  2. Michelle Hodson ,, 18 November 2009, How Payday Loans Work
  4. Payday lenders hope to return in Georgia, 3/18/07. Retrieved on November 15, 2012.
  5. The John Warner National Defense Authorization Act - Talent Amendment. (October 1, 2007). Retrieved on November 15, 2012.