Payday Loan Definition

A payday loan is a small, short-term loan that usually involves less than $500 and persists for less than two weeks. They are intended to cover debts coming due prior to an individual’s next paycheck. Payday loans are one of the worst ways to obtain credit because they bear exceptionally high interest rates-often as much as 400% APR. For example, typical fees average $15 for each $100 loaned over each weekly period. Many jurisdictions severely limit payday loans as they are considered a type of predatory lending.