What Is a Payday Loan? Definition & Example

A payday loan is a small-dollar, short-term loan that is due on your next payday. It is designed to cover a gap between paychecks, not to be carried for months. This is a plain definition page; for a fuller treatment see Payday Loans Explained.

The Payday Loan Times is an independent news archive. We are not a lender and do not arrange loans, and nothing here is financial advice.

A worked example

Suppose you borrow $300 with a fee of $15 per $100, due in two weeks. You would repay $345. That $45 fee equals an APR of roughly 391%. If you cannot repay and roll the loan over, you pay the fee again — without reducing the $300 principal.

How it differs from other credit

• Term: days or weeks, versus months or years for installment loans.
• Underwriting: often based on income and a bank account rather than a full credit check.
• Cost: very high APR relative to credit cards or personal loans.

Related reading

See our cash advance guide and the glossary for definitions of rollovers, APR, and related terms. Our state archive tracks how payday-loan rules differ across the country.