Payday Loan FAQ — US

A payday loan is a small, short-term loan, typically a few hundred dollars, due in full (plus a flat fee) on your next payday, usually within two to four weeks. It's typically unsecured and doesn't require a credit check, which is part of why the fee is so high relative to the amount borrowed.

A common fee is around $15 per $100 borrowed for a two-week term. Annualized, that works out to roughly 391% APR, since the same fee would repeat about 26 times over a year. Some states allow higher fees, pushing the effective APR well above 400%.

Most payday lenders offer to 'roll over' the loan: you pay a new fee to extend the due date, while the original amount owed stays the same. Each rollover adds another fee on top of the ones already paid, which is how the total cost can quickly exceed the amount originally borrowed.

No. Some states cap the APR on small loans low enough that traditional payday lending isn't profitable there, and a handful effectively ban it outright. Other states allow it with few restrictions. Check your specific state's rules before assuming what applies where you live.

A Payday Alternative Loan (PAL) is a small-dollar loan offered by federal credit unions, capped by federal regulation at a maximum 28% APR with modest application fees, far below typical payday loan costs. You generally need to be a credit union member, sometimes for a short qualifying period, first.

Not always. Many earned-wage-access apps advertise no mandatory fee, but charge optional 'tips' or expedite fees that function similarly to interest when annualized, especially on small amounts borrowed for a few days. Read the fee structure closely before assuming it's free.

Often, yes. Many utilities, landlords and even some lenders have hardship or payment-plan options they don't advertise, and will grant a short extension or installment plan if you ask before the due date, rather than after you're already behind.

Most payday lenders don't report on-time payments to the major credit bureaus, so paying one off responsibly typically doesn't help your credit. If a loan goes to collections, though, that can show up and hurt your credit significantly.

Warning signs include lending without checking your state license status, guaranteeing approval regardless of your ability to repay, pressuring you into repeated rollovers, demanding payment through unusual channels, or using threats and aggressive tactics to collect. Verify any lender against your state regulator before borrowing.

Start by listing every open payday loan with its balance and due date, then look at nonprofit credit counseling, a credit union PAL to consolidate the balances at a much lower rate, and a direct conversation with each lender about a no-additional-fee extended payment plan, which many states require lenders to offer on request.

The initial session with an NFCC-affiliated nonprofit agency is free in almost every case. They can review your whole financial picture, including any payday loans, and suggest a realistic path forward at no cost for that first conversation.

No. Every rule, agency and figure on this site reflects US law and US providers, which themselves vary significantly by state. If you're dealing with short-term borrowing in another country, the underlying math ideas may help but the specific rules won't match.