What is payday loan?

Answer 1

A payday loan (also called a payday advance, salary loan, payroll loan, small-dollar loan, short term, or cash advance loan) is a short-term unsecured loan, often characterized by high-interest rates.

The term "payday" in payday loan refers to when a borrower writes a postdated check to the lender for the payday salary, but receives part of that payday sum in immediate cash from the lender.

Answer 2

Payday lenders, for example, typically charge about $15 for every $100 borrowed. So, on a $500 loan for two weeks, you'd pay $75 in interest. That might not sound like a lot of money to pay for a small loan, but it translates to a whopping 391 percent Annual Percentage Rate! (The APR is the effective annual interest rate on a loan after taking into account one-time fees and interest.) And if you renew or "roll over" the $500 loan for another two weeks, you'd pay an additional $75 in fees. At that rate, in just 14 weeks, you will owe more in fees ($525) than the original loan! "Consumers often roll over the same payday loan several times because they cannot pay the full amount on the due date," said Rae-Ann Miller, special advisor on consumer issues in the FDIC's research division. "These consumers can end up paying significant sums to borrow what started out as a small amount of money." A payday loan is when a business loans someone money until they get paid. After they receive their paycheck, they pay the business back for the loan.

Answer 3

Payday loan is a short term loan to help you overcome financial problems on temporary basis. A borrower is liable to repay the loan on next payday.