Payday loans explained.

A payday loan is a short-term loan — typically $100–$1,000 — repaid in a single payment on your next payday. The lender charges a flat fee rather than a monthly interest rate. You receive the loan amount and repay the amount plus the fee in one debit on the agreed due date.

Do not focus only on the amount you receive. The critical figure is the flat-dollar total leaving your account on the due date — advance plus fee. That is the cost. Calculate whether that total fits within your next pay deposit after rent, utilities, groceries and other essential expenses. If it does not fit comfortably, do not borrow the full amount.

APR on a payday loan is typically in the hundreds of percent — sometimes over 400%. This is not because payday loans are uniquely expensive per dollar compared to other products. It is because APR annualises a short-term fee over 365 days, which inflates any rate measured in weeks. A $15 fee on a $100 two-week loan is 15% of the amount. Annualised, it is 391% APR. The APR is useful for comparison, but the flat-dollar fee is the real cost to evaluate.

If you cannot repay the full amount on the due date, some lenders offer a rollover — extending the loan term in exchange for an additional fee. Each rollover adds cost and delays the problem. A $300 loan rolled over four times at $45 per rollover adds $180 in fees before you repay the original amount. The Consumer Financial Protection Bureau (CFPB) has documented repeat borrowing as one of the most common risks with payday products. Budget for the full repayment before you accept.

Payday loan fees and terms are regulated by state law. Many states cap the fee per $100 borrowed, limit rollovers or prohibit the product entirely. Check your state regulator's website or the CFPB database to understand what protections apply where you live before you sign.

Before you accept, check: the exact dollar amount you receive; the flat fee in dollars; the total amount leaving your account on the due date; the exact collection date and collection method (ACH debit); what happens if the payment is returned; and the late fee and grace period if any.