Payday Loan Basics

A payday loan, sometimes also called a cash advance loan or advance payday loan, is a short-term loan that you can take out against your paycheck. If there are still a few more days before you get your paycheck and you need cash right away, a payday loan may be the way to get it.

How It Works

It's important to understand how a payday loan, such as through, works. You can get a payday loan online from a variety of lenders. Some brick-and-mortar check-cashing services also offer payday loans.

You will be asked to fill out an application, which will indicate where you work, as well as how much and how frequently you get paid. When your application is approved, the payday lender will directly deposit the funds into your checking account. The next time you get paid, the lender will debit your checking account for the amount of the loan and the interest.

Since the lender will be taking the repayment directly from your checking or savings account as soon as your next paycheck is deposited, payday loans are usually available to those with no credit or bad credit. This makes them attractive to those who may not qualify for a loan from a bank or credit union.

If you cannot repay the entire amount with your next paycheck, you can roll over all or part of the loan to the next pay cycle. Keep in mind that interest will continue to accrue until the entire loan plus the interest is paid in full.


Some illegitimate payday lenders do business only online so they may be difficult to track down if there is a problem. In order to receive funds and repay the loan, you will need to give the lender access to your bank account information, so it's important to be sure the lender you're dealing with is reputable.

Make sure that the lender you choose is licensed in your particular state. Some states regulate the amount of interest and fees that payday lenders can charge. In addition, many states' attorneys general watch payday lenders closely to make sure they are practicing legally and ethically.

Since a payday loan is designed to be very short term, the interest rate is often high compared to other loans. If you pay back the loan with your next paycheck, the actual amount of interest you pay may not be very much. If you continuously roll the loan over to your next paycheck, however, you may find that the interest starts to pile up fast. Payday loans work best when you can pay off the entire loan plus interest with your next paycheck.