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Payday loans are short term loans that help a borrower who has a pay check or a fixed income such as from Social Security get through until the next pay day or receipt of fixed income. Payday loans are typically loans for two weeks. Payday loans are offered by payday lenders and (in most states) traditional banks, even if the loans are not called "Payday loans".

Storefront and online lenders usually require a predated check (a check that is payable on a specified future date). Banks frequently require the right to automatic withdrawal from the borrower's account. (These methods are described in more detail below).

Payday loans frequently trap borrowers in a cycle of debt because many borrowers find they cannot pay off the loan completely by the due date without needing another loan to cover ongoing expenses.  

With a payday loan:

  • The money is usually available to the borrower the same day or within 24 hours.
  • The amount of money that can be borrowed depends on the amount of the borrower's pay or fixed income. Generally amounts range from $500 to $1,500.
  • Interest rates are high (sky-high is a phrase often used when experts talk about interest rates on payday loans). Fees may also be payable.
  • There is generally no background or credit check required.
  • Payday loans can be accessed through local lenders who are generally check cashing companies, online, or through traditional banks such as U.S. Bank and Wells Fargo. (Banks tend to call these loans something other than "payday" loans or even loans. They may instead, for example, use a word such as "advance"  - as in "an advance against your next check."

On the downside, interest rates on payday loans are very high. There may also be fees that have to be paid. Payday Loans should only be used when absolutely necessary.

Before considering a payday loan, consider your other loan options. For a list of potential options to consider, click here.

If you feel that a payday loan is your only option:

  • Compare interest rates, fees and penalties, and other terms, before saying "yes."   Some credit unions offer payday loans with low fees. To locate a credit union, consider the following alternatives. (Be sure to check eligibility requirements.)
    • Check with your employer, family members or organizations of which you're a member to learn about local credit unions and to find out if you are eligible to join one.
    • Several web sites list credit unions by ZIP code. For instance: National Association of Federal Credit Unions: offsite link and National Credit Union Administration: offsite link
  • The internet makes comparison of different lenders easy. (see the section below about internet sites).
  • Try to borrow only as much as you can afford to repay with your next paycheck.
  • Do not take a loan that allows the lender to take repayment from a checking or savings account or prepaid debit card.
    •  You may get stuck and not have money for essentials such as food and medications.
    •  If you deal with a bank which insists you have a checking or savings account with the bank, do not have Social Security checks deposited into the same account. While legally creditors are prohibited from garnishing money from Social Security, you are likely to be stuck with a time consuming appeal such as to the Consumer Financial Protection Bureau. (At offsite link, click on "submit a complaint.")
  • Do not permit overdraft protection on debit card purchases and ATM withdrawals to be tied to a Payday loan. There is no fee if a debit card purchase or ATM withdrawal is denied for lack of funds.
  • Know when your payment is due and do everything you can to repay the loan on time and in full. Not repaying in full usually means the lender charges very high additional fees that becomes a cycle that is difficult to get out of.
  • Avoid a loan that promises to improve your credit score. Taking out a payday loan may actually hurt your credit score. To learn about credit scores, click here

For more information, please see:


  • Because of high interest rates and fees, before taking a payday loan, look for alternatives. For example, a loan from a family member or funds from social service and faith-based organizations. Consider speaking with a credit counselor. For information, including about how to find a reputable credit counselor, click here.
  • Once a payday loan is paid off, try to plan for the future by creating a budget that includes an emergency+fund for unexpected expenses.  (To learn how to create a budget easily, and live within one. To learn how, click here.)
  • If you have a complaint about a payday loan, the CFPB has authority over storefront and internet lenders. Go to its website at: offsite link

What Happens If A Payday Loan Is To Be Repaid By Check

If a Payday loan is to be repaid by check, the usual procedure is as follows:

You, the borrower, give the lender a check payable to the lender. In exchange, you receive cash minus a fee. For example, you give the lender a check for $200 and receive $170 in cash.

Both parties understand that you do not have sufficient money in your account to cover the check when you write it. The lender agrees to hold the check until your next pay day, or another date in the next few weeks.

On the agreed date, one of several alternatives happens.

  • The lender deposits the check.
  • You, the borrower, gives the lender cash for the check and get the check back.
  • The loan is rolled over (extended) for an additional fee - which, again, is a high fee.

How Online Payday Loans Work

With an online loan, the loan proceeds are generally deposited directly into the borrower's checking account. Loan payments (and finance charges) are withdrawn electronically from the checking account.

Borrowers can automatically renew or rollover the loan. The lender automatically withdraws finance charges at the end of each loan term.

If there are not sufficient funds in the borrower's account when the lender attempts to take a charge or loan repayment, both the lender and the borrower's bank charge fees.

In addition to high fees, borrowers have the risk that their privacy will be breached and that personal and financial information will be misused. Financial and personal information is transmitted over the internet, often over web links which are not secure. Information lenders usually require includes:

  • Social Security Number
  • Bank account information
  • Employer information

How To Find A Payday Loan Online

There are web sites which help find a pay day loan by loan amount and the state you live in. For instance:

If you are not a member of a credit union, following are alternatives for finding a credit union. Be sure to check eligibility requirements.

  • Check with your employer, family members or organizations of which you're a member to learn about local credit unions and to find out if you are eligible to join one.
  • Several web sites list credit unions by ZIP code. For instance:

We have not used any of the sites. If you do use them, please share your feedback by e mail to: Survivorship A to Z

You can also search in your favorite search engine under the words: Payday loan.