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Payday loans are short-term loans that are often used to get through a rough spot. Unfortunately, there are very few situations in which these loans actually end up being helpful. Before you use one, make sure you understand the costs and risks. This page gives you a quick overview of how payday loans work and ideas on how to avoid them.

Payday loans are small loans you can use when you are temporarily out of money. Most often, payday loans are short-term loans (two weeks or so) for a modest amount of money (a few hundred bucks). To get a payday loan, you typically write a check for the amount you are borrowing – plus a fee. You might leave the check with the lender, and they cash it once you are ready to repay.

If you can’t repay your payday loan when it comes due, you can sometimes “roll it over” so that the loan is extended. You don’t have to repay it, but fees keep accumulating. Some states regulate rollovers — either outlawing them or limiting the number of times you can renew.

Payday loans are sometimes marketed as “no credit check” loans. You don’t need good credit scores (or any credit history), and getting “approved” is easy relative to more traditional loans. As a result, they are popular with people facing financial difficulty.