What is a payday loan?

A payday loan (also called a paycheck advance or payday advance) is a small, short-term loan that is intended to cover a borrower's expenses until his or her next payday. Typical loans are between $100 and $500 and are due in two weeks, with interest rates of up to 400% APR. On a two-week loan, fees average $15 for each $100 lent. The loans are also sometimes referred to as cash advances, though that term can also refer to cash provided against a prearranged line of credit such as a credit card.

Legislation regarding payday loans varies widely between different countries and, within the USA, between different states. Some jurisdictions impose strict usury limits, limiting the APR that any lender, including payday lenders, can charge; some outlaw payday lending entirely; and some have very few restrictions on payday lenders.

The industry's fast-paced growth indicates a successful business model with profitability typical of other consumer financial services businesses. Statistics compiled by the Center for Responsible Lending show that the majority of the industry's profit comes from repeat borrowers who are unable to repay loans on the due date and instead repeatedly renew their loans, paying fees each time.[2] The payday lending industry disputes these contentions.

Due to the extremely short-term nature of payday loans, the difference between APR and effective annual rate (EAR) can be substantial, because EAR takes compounding into account. For a $15 charge on a $100 2-week payday loan, the APR is 26 × 15% = 390% but the EAR is 1.1526 - 1 × 100% = 3686%. Careful reporting of whether EAR or APR is quoted is necessary to make meaningful comparisons.

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This article "What is a payday loan?" will be helpful to who are looking for "" related home loan informations.
What is a payday loan?
A payday loan (also called a paycheck advance or payday advance) is a small, short-term loan that is intended to cover a borrower's expenses until his or her next payday. Typical loans are between $100 and $500 and are due in two weeks, with interes...

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