A payday loan is a type of short-term loan that gets its nickname from the fact that repayment is usually due by your next payday (or 2-4 weeks).
Unlike other loans that let you pay back the money through a series of smaller monthly payments, with a payday loan you need to pay back the entire loan, in one lump-sum, on its due date.
Learn: What happens if you don't pay back a payday loan?
Payday loans are usually used to cover emergency expenses, like when you need a little extra cash to help cover your rent or find yourself dealing with an unexpected auto repair problem.
Unlike most other types of loans, which usually require a credit check and have a lengthy approval process, you can typically get the cash you need with a payday loan on the same day you fill out your application ā no credit check required. ā
To qualify for a payday loan, you typically only need to provide a few pieces of information:
- Valid government-issued ID
- Social security number
- Proof of income (paystubs, bank statements, etc.)
- Bank account where you can receive your loan
After you're approved, you can expect to receive your payday loan in your account in just a few hours. Some lenders also offer the option to pick up your funds in-store or at a money transfer service location, and some select lenders even offer the option of a prepaid debit card (often for borrowers who don't have a bank account).
Learn: Can I get a payday loan without a bank account?
While payday loans can help you get cash fast, this doesn't mean they're a perfect solution for covering your immediate expenses. Payday loans often come with high interest and fees, with APRs sometimes as high as 400%![1]
The high cost of your payday loan can cause the amount of money you owe back to your lender to take off faster than you can repay it. š So, if you're not careful, you could find yourself trapped in a cycle of constantly renewing your payday loan and never getting out of debt.
Learn: How much is a payday loan?
If you have bad credit and need emergency cash, it's better to look at other options like installment loans and title loans, which have more more affordable APRs and flexible repayment plans.
