Resources: the official sources and the terms worth knowing
Real .gov and nonprofit links first, then the mistakes and terms that come up most.
- Consumer Financial Protection Bureau — Payday Loans — Federal guidance on how payday loans work, your rights, and how to file a complaint against a lender.
- Federal Trade Commission — Payday Loans — The FTC's plain-English guide to payday loans, costs, and warning signs of a scam lender.
- National Credit Union Administration — Payday Alternative Loans — The federal regulator overseeing credit unions and the PALs I and PALs II program rules.
- National Foundation for Credit Counseling (NFCC) — Directory of accredited nonprofit credit counseling agencies offering free consultations.
Rules, thresholds and providers described here are those of the United States. Payday lending rules vary sharply by state.
Checklists you can work through
Before you take a payday loan
- Run the true-cost calculator on this site to see the real annualized rate.
- Call your biller to ask about a short extension or payment plan first.
- Check whether a credit union near you offers a PAL.
- Check your employer's handbook for wage-access or emergency assistance benefits.
- Verify the lender's state license if you're still considering one.
- Know your state's rollover and extended payment plan rules before you sign anything.
If you're already rolling over a payday loan
- List every open loan with its balance, fee and next due date.
- Call each lender and ask specifically about a no-fee extended payment plan.
- Check whether a credit union PAL can pay off the balance at a lower rate.
- Book a free session with an NFCC-affiliated nonprofit credit counselor.
- Dial 211 for local emergency assistance resources if the gap is broader than one bill.
- Note any aggressive or threatening lender behavior and consider a CFPB complaint.
Common mistakes people make with payday loans
Comparing the flat fee instead of the annualized cost
A $15-per-$100 fee sounds small next to the loan amount, but annualized it's roughly 391% APR. Always compare the annualized rate, not the flat dollar fee, against other borrowing options.
Rolling the loan over without asking about a no-fee extended payment plan
Many states require lenders to offer an EPP on request, which breaks the balance into installments with no new fee. Ask before agreeing to another rollover.
Not checking whether a lender is actually licensed in your state
Verify any lender against your state regulator's public database before providing personal or banking information, especially for online lenders.
Assuming a paycheck advance app is automatically free
Check for expedite fees, monthly membership fees, and whether the tip is defaulted above zero — these can add up to a meaningful effective cost.
Never calling a biller to ask for more time before borrowing
Many utilities, landlords and lenders offer a short extension or payment plan at no cost if you ask before the due date, not after.
Not checking whether an employer already offers wage access or emergency assistance
A number of US employers offer early wage access or a hardship fund, often with little publicity. Check your handbook or ask HR directly before assuming none exists.
Glossary
The words that get used as if everyone already knows them.
Payday loan
A small, short-term loan, typically due in full plus a flat fee on your next payday, usually within two to four weeks.
APR (annual percentage rate)
The cost of borrowing expressed as if it applied for a full year, allowing loans of different lengths to be compared on the same scale.
Finance charge
The total dollar cost of a loan, including fees and interest, that a lender is required to disclose under the Truth in Lending Act.
Rollover
Paying a new fee to extend a payday loan's due date, while the original principal owed stays the same.
Extended payment plan (EPP)
A no-additional-fee installment arrangement many states require payday lenders to offer on request, breaking the balance into smaller payments.
Earned wage access (EWA)
A service, often an app, that advances a portion of wages already earned but not yet paid, typically repaid automatically on the next payday.
Payday Alternative Loan (PAL)
A small-dollar loan federal credit unions are authorized to offer, capped at a maximum 28% APR under NCUA rules, as a lower-cost alternative to payday lending.
Ability-to-repay
A lender's assessment of whether a borrower can realistically repay a loan; a lender that skips this check and guarantees approval is a warning sign.
ACH authorization
Permission you give a lender to withdraw payment electronically from your bank account; you have the legal right to revoke it directly with your bank at any time.
Balloon payment
A single large payment (principal plus fee) due at the end of a short loan term, typical of a payday loan structure rather than gradual installments.
Usury cap
A state-set maximum interest rate or fee a lender may legally charge; some states set this low enough that traditional payday lending isn't commercially viable.
Cooling-off period
A required waiting period some states impose between paying off one payday loan and taking out another, meant to interrupt back-to-back borrowing.