What Is a Payday Loan?


Quick Answer

A payday loan is a short-term loan, usually $500 or less, that borrowers are expected to pay before their next payday. Payday loans are an option to fund unexpected purchases that arise before the end of the month.

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Full Answer

When applying for a payday loan, borrowers must provide access to their accounts or write a check in advance. The loan plus the interest will be deducted from the borrower's balance on the borrower's payday. A payday loan can be structured to be paid in one full payment or by installments. The cost of the loan may vary from one lender to another.

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