Payday loans are short-term loans with very high costs. Rules vary a lot by state, and some states ban or cap them.
How they work
You borrow a small amount and agree to repay it, plus a fee, on your next payday, often in two weeks. Because the fee works out to a very high annual percentage rate, many borrowers roll the loan over and pay more.
State regulation
- Some states ban payday loans or cap interest rates.
- Others limit loan amounts, fees and rollovers.
- Many require licensing and disclosures.
- Active-duty military members have federal rate protections.
Alternatives
- Credit union payday alternative loans.
- Payment plans with creditors or utilities.
- Employer advances or community assistance.
- Small-dollar bank loans.
- Nonprofit credit counseling.
If you are struggling with one
- Read your loan agreement and state rules.
- Ask the lender for an extended payment plan, which some states require.
- Do not take a new loan to pay the old one.
- Report illegal practices to your state regulator and the Consumer Financial Protection Bureau.
- Seek credit counseling.
Frequently asked questions
Can a payday lender garnish my wages?
Not without a court judgment in most cases.
Are online payday lenders regulated?
They must follow state and federal law, but some operate illegally.