A payday loan is a type of short-term borrowing where a lender will extend high-interest credit based on your income. Its principal is typically a portion of your next paycheck. Payday loans charge high interest rates for short-term immediate credit. They are also called cash advance loans or check advance loans.

KEY TAKEAWAYSPayday loans are short-term, very-high-interest loans available to consumers.Payday loans are typically based on how much you earn, and you usually have to provide a pay stub when applying for one.A number of laws have been put in place over the years to regulate the high fees and interest rates with payday loans.Understanding Payday LoansPayday loans charge borrowers high levels of interest and do not require any collateral, making them a type of unsecured personal loan. These loans may be considered predatory lending, as they have extremely high interest, don’t consider a borrower’s ability to repay, and have hidden provisions that charge borrowers added fees.1 As a result, they can create a debt trap for consumers. If you’re considering a payday loan, then you may want to look first at safer personal loan alternatives. Investopedia.com

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