Mint Money Knowledge Center: What is a payday loan?

payday 5-29-15.jpgMany people have been in a situation where they desperately need cash, but payday is still days away. If your credit cards are maxed and you don't want to borrow money from your friends or family members, then you may want to consider getting a payday loan. It is important to know what you are getting into with a payday loan and understand the terms of the loan before you sign up.
 

What Is A Payday Loan?

According to the Consumer Financial Protection Bureau, a payday loan is a short-term loan that is usually given in an amount of $500 or less, although there are companies that offer payday loans in amounts as high as $1,500 to $2,000. The payback term for a payday loan is by your next payday and there are steep penalties if you do not pay the loan back on time.
 

The Interest Rate On A Payday Loan

According to Investopedia.com, payday loans have fees that can seem reasonable, but actually represent extremely high interest rates. For example, a fee of $20 to borrow $100 for seven days can seem very low, but when spread out over the course of a year that interest rate approaches 1,000 percent. That is why it is always best to pay back payday loans on their due dates.

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