Payday lenders provide fast access to cash when you're in a financial bind. While these loans can help in emergencies, they often come with high fees and short repayment terms. It’s important to understand the costs and risks involved before choosing a payday loan to cover urgent expenses.
Editor
Zarina S
Update 28.01.2025
When cash is tight and bills are piling up, it feels like a race against time. Payday loans are seen as a quick fix, a way to get instant relief when you need cash before your next payday. But while they are convenient, the fees and interest can quickly turn a short-term solution into a long-term problem. You need to know the risks and costs before you decide if a payday loan is right for you.
What Is a Payday Loan?
A payday loan is a small short-term loan of under $1,000 to help you cover urgent expenses until your next payday. These loans are easier to get than traditional loans because lenders don’t usually do a credit check, so they are open to people with bad or no credit. The repayment term is usually 1-4 weeks, and you repay in full on your next payday. But payday loans come with high costs – often with APRs over 300%. The application process is quick and can be done online or in-store, but be aware that if you don’t repay the loan on time you will be charged extra fees and potentially damage your credit score.
How Much Do Payday Loans Cost?
Payday loans are expensive short-term loans, with fees of $10 to $30 for every $100 borrowed, depending on your state and loan amount. The APR (Annual Percentage Rate) for payday loans is very high, around 400% but can go up to 800% or more. Personal loans or credit cards have much lower APRs – 15-30%.
For example, borrowing $200 with a $30 fee over 12 days would be a 456.25% APR. The fees may seem small for a short loan term, but the annualized cost is massive. If you roll over the loan, meaning you extend the repayment period, you’ll incur more fees and the APR will keep going up.
Payday Loan Risks
Debt cycle. Payday loans can trap you in a debt cycle, many borrowers need to roll over loans and take new ones to pay off old debts. Each rollover adds more fees and makes it harder to repay.
High interest rates. Payday loans have interest rates over 400% APR, making it hard to pay off the loan in full and leaving you with more debt.
Credit score damage. Payday loans don’t help build credit, but defaulting on one will damage your credit score and stay on your record for years.
Financial strain after repayment. Paying off a payday loan will leave you short on cash for other bills, and you’ll miss payments, which will worsen your financial situation.
Legal issues. Defaulting on payday loans can lead to legal action and extra costs, including collection agency fees.
Unregulated fees. In some states, payday lenders charge excessive unregulated fees so you’ll pay more than you borrowed.
Rollovers and extensions. Payday lenders make it easy to roll over loans, which adds more debt each time.
When to Get a Payday Loan
Need less than $500. For small loans under $500 payday loans are a quick fix especially when other borrowing options are limited or not available.
Need money today. Payday loans are one of the few options that offer cash fast, especially if you need the money the same day outside of business hours, on weekends.
No bank account. Some payday lenders don’t require a bank account to qualify, they offer cash or debit card disbursements instead, which is good if you don’t have an account.
Other sources of income. If you rely on non-salary income like government benefits or alimony, payday loans may be one of the few options to get funds fast.
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Top Payday Loan Lenders
Payday lending has grown rapidly over the past two decades, providing quick, short-term loans for those in need of fast cash. Below, we review three of the top payday lenders offering these services today.
Check ‘n Go
Overview. Check 'n Go offers payday loans for emergency expenses, quick application, and fast access to cash. Good for bad credit but high costs and mixed reviews, so be sure to compare other options. Services vary by state, so check availability before applying.
Amount. Loans from $100 to $1,700 depending on state laws. For example, in California, the maximum loan amount is $255.
Terms. Loan terms are 7 to 31 days, but may vary by state. For example, in California, the loan term is 10 to 31 days.
Costs. The cost of borrowing from Check ‘n Go depends on the state you live in. For example, in California borrowing $255 incurs a $45 finance charge, the total repayment amount is $300. APR for a 10-day loan of $255 is 391.25%. If a payment is returned, a $15 fee is added.
Check City
Overview. Check City is a licensed payday lender in 15 states. They offer payday loans and other services like personal loans, installment loans, and title loans depending on the state. They are known for being transparent about state-specific consumer protections, they provide detailed information about rates and terms, but loan amounts, fees, and repayment terms vary by location. Online applications are available in most states, but in-person applications are only available in Utah, Nevada, Virginia, and Colorado.
Amount. The loan amount ranges from $100 to $300, but varies by state. For example, in Alaska, the maximum loan amount is $500.
Terms. Loan terms are 7 to 31 days but can be longer in some states. For example, in Alaska, you have 14 to 36 days to repay the loan.
Costs. Fees also vary by state. For example, in Alaska, you pay a non-refundable origination fee of $5 and a $15 fee for every $100 advance. APR ranges from 150% to over 600% and in extreme cases over 1,042%. Always check your rate on Check City’s website before applying.
Check Into Cash
Overview. Check Into Cash is a licensed payday lender that provides emergency loans to individuals with bad credit. They offer loans from $50 to $1,500 depending on the state. If you apply in person, you can get cash the same day, but online applications may take up to 24 hours. But fees can be over 600% APR in some cases and repayment terms as short as 14 days depending on the state.
Amount. Loan amounts from $50 to $1,500, but the amount you can borrow varies by state. For example, in Iowa, you can borrow up to $445.
Terms. Loan terms are 2 to 4 weeks but vary by state. In Iowa, the term is 14 to 30 days.
Costs. The cost of borrowing varies by loan amount and state. For example, in Iowa borrowing $50 is an $8.82 fee which is a 459.90% APR. For a $445 loan, the fee is $55.00 which is 322.23% APR. Check your state’s rates and fees before applying.
Payday Loans Pros and Cons
Pros
Payday loans are easy to get and get cash fast, so it’s a convenient option in emergencies.
They have fewer requirements than other loans, so it’s available even to those with limited financial documents.
Payday loans are available to individuals with bad credit, so it’s an option for those who can’t qualify for traditional loans.
Cons
Loan amounts are small, most payday lenders offer loans from a few hundred to a thousand depending on the state.
Payday loans have extremely high fees with annual percentage rates of over 400%.
Loan terms are very short, few days to a month, which can be difficult for borrowers who need more time to pay back the loan.
Low-Cost Alternatives to Payday Loans
Cash Advance Apps
Cash advance apps are a cheaper and more flexible alternative to payday loans. Like payday loans, they allow you to borrow without a credit check, with repayment due on your next payday. But cash advance apps have lower fees and no overdraft fees. They won’t send you to collections if you can’t repay, unlike payday loans, which can cause severe financial consequences. Cash advance apps won’t improve your financial situation, but it’s a less risky option than payday loans.
Best Cash Advance Apps
EarnIn
Overview. EarnIn is an app that allows employees to get their earned wages before payday. It doesn’t charge interest but offers advances with optional fees including a tip. The service is for individuals with direct deposit paychecks to cover small emergency expenses before their next payday.
Amount. EarnIn offers advances up to $150 per day, and $750 per pay period, based on the wages you’ve already earned. The amount you can get depends on your earnings and the frequency of your pay periods.
Terms. Repayment is automatically deducted from your account on your next direct deposit date. No need for additional paperwork or approval.
Costs. The app charges an optional fast-funding fee of $2.99 to $5.99 depending on how fast you need the funds. Users can also leave a voluntary tip up to $13, but it’s not required.
Dave
Overview. Dave offers paycheck advances through its ExtraCash feature to help with small emergencies or income gaps. Available to part-time and temporary workers, Dave is for those who don’t have regular paychecks, but you need to open a Dave checking account and pay a subscription fee.
Amount. Dave offers up to $500 per request. The amount available for the advance is based on your income and account activity, so the loan amount is aligned with what you can reasonably repay.
Terms. Repayments are automatically deducted from your Dave checking account on your next payday or the first Friday after the advance. So you have a predictable repayment schedule that fits within your regular financial cycle.
Costs. Dave charges a $1 monthly subscription fee. There’s also a fast-funding fee of $3 to $25 depending on how fast you need the funds. You can also add an optional tip up to 25% of the advance amount.
MoneyLion
Overview. MoneyLion Instacash offers cash advances to users with direct deposit paychecks. No fees are required, but users must pay a monthly membership fee and optional additional features like credit-building tools and budgeting. These features are useful for those who want to improve their financial situation over time.
Amount. You can borrow up to $500 or $1,000 with premium features in increments of $100. The amount available for advance depends on account activity and if premium membership features are chosen.
Terms. Repayment is automatically deducted from the linked bank account on your next payday, and you can opt to extend the repayment date if needed. This way you can manage your repayments around your payday.
Costs. MoneyLion charges a monthly membership fee of $9.99 or $19.99 depending on the features you choose. There’s also an optional fast-funding fee of $0.49 to $8.99 if you need the funds faster.
Quick Loans
Quick loans are personal loans that offer fast approval and funding, usually without collateral. Instead of appraising your assets, lenders evaluate your credit, income, and debt to determine eligibility and interest rates. APRs for personal loans range from 6% to 36% with lower rates for those with good credit. Some lenders may charge an origination fee, which will be deducted from the loan amount and included in the APR. Loan amounts for quick loans range from $1,000 to $100,000 and repayment terms are fixed, usually 2 to 7 years.
Best Quick Loans Lenders
Upstart
Overview. Upstart is a California-based lending marketplace that uses AI to connect borrowers with lenders. It’s a good option for those with bad or limited credit history, as it accepts credit scores as low as 300 and has flexible loan terms. With fast funding, loans are usually disbursed within one business day, so it’s a good choice for urgent financial needs.
Amount. Loan amounts range from $1,000 to $50,000 depending on the applicant’s qualifications and needs. Upstart has large loan options for various purposes like debt consolidation, home improvement, and moving expenses.
Terms. Loan terms are offered in 3, 5, or 7-year increments. This allows borrowers to choose the repayment period that fits their budget and financial situation.
Costs. Upstart charges an origination fee of 0% to 12% which can either reduce the loan amount or increase the total balance. Additional fees include a late fee of 5% of the unpaid amount or $15, whichever is greater, and an insufficient funds fee of $15.
OneMain Financial
Overview. Founded in 1912, OneMain Financial offers both secured and unsecured personal loans, and specializes in helping customers with less-than-ideal credit. With over 1,300 branches across 44 states, it provides quick access to funds, including in-person loans that can be processed in under an hour. The company also allows you to change your payment dates twice during the loan term, which is good for borrowers who want convenience.
Amount. Loan amounts range from $1,500 to $20,000 so you have large loan options for those who need big funds for various purposes like debt consolidation and personal expenses.
Terms. Loan terms are 2 to 5 years, so you can choose a term that fits your financial situation and repayment ability.
Costs. OneMain charges an origination fee of $25 to $500 or 1% to 10% of the loan amount, depending on the loan. Late fees are $5 to $30 or 1.5% to 15% of the payment amount, and a non-sufficient funds fee of $10 to $50.
Avant
Overview. Founded in 2012, Avant is a Chicago-based lender that offers personal loans and a credit card, and specializes in fair to bad credit borrowers. With over 2 million borrowers served, it provides quick access to funds and fast approval, so it’s a good option for those who need urgent financial help. Avant also has a hardship program where borrowers can adjust their payments if they’re having trouble.
Amount. Loan amounts range from $2,000 to $35,000 depending on the borrower’s needs.
Terms. Loan terms are 2 to 5 years so you have flexibility in repayment depending on your financial situation.
Costs. Avant charges an origination fee of 0% to 9.99% depending on the loan. Late fees are $25 and non-sufficient funds fee of $15.
How to Apply for a Payday Loan
Gather your info. When applying for a payday loan, have your personal info, bank account info, and proof of income ready. This will speed up the application process and reduce the chance of errors that can cause delays or rejection.
Go to the lender’s website or storefront. You can apply online through most payday lenders’ websites, but if you need funds fast or want in-person assistance, go to a physical store for same-day approval.
Fill out the application. Filling out the payday loan application only takes a few minutes. Provide the required info including your Social Security number and bank details and wait for approval, which may take a few minutes.
Review your loan and sign. If approved, read the loan agreement carefully, and note the loan amount, APR, fees, and repayment terms. If you’re not comfortable with the terms, you can decline the loan offer before signing.
Conclusion
Payday loans can give you quick financial help, but their high fees and short repayment terms are not good for those who are already struggling with their finances. Be aware of the consequences of borrowing such loans, as the debt cycle can quickly spin out of control due to high fees and interest rates. Look into other lending options like personal loans with better terms or cash advance apps. Always read the fine print, seek advice when needed, and make sure any loan you take is manageable to your financial situation.
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FAQ
Are payday loans legal everywhere in the U.S.?
No, payday loans are not legal in all states. In fact, they are banned in thirteen states: Arizona, Arkansas, Connecticut, Georgia, Maryland, Massachusetts, New Jersey, New York, North Carolina, Pennsylvania, Vermont, West Virginia, and the District of Columbia.
In states where payday lending is allowed, regulations vary widely. Some states impose limits on interest rates and fees to protect consumers, while others have minimal oversight, allowing lenders to charge excessively high rates, sometimes exceeding 400% APR, which can lead to a dangerous cycle of debt.
What is the Community Financial Services Association of America (CFSA)?
The CFSA is a national trade organization of payday and short-term lenders. It advocates for the right to offer small-dollar loans and works to establish industry standards through transparent disclosures and honest advertising. While the CFSA promotes consumer protections, it’s primarily for the lenders’ interest, which may not always be in the best interest of the borrower.
What happens if I can’t pay my payday loan?
If you can’t repay a payday loan, the lender will send your debt to a collection agency. Debt collectors can be nasty, but they can’t threaten you with illegal jail time. According to the Consumer Financial Protection Bureau (CFPB), you can’t be arrested for default. But the lender can sue you to recover the debt and if they win a court judgment they can garnish your wages to collect the amount owed.
