Payday loans provide quick access to a small amount of cash, usually due in full on your next payday. They are regulated at the state level, and the rules vary enormously: some states cap rates in a way that makes payday lending unviable, some prohibit it outright, and others allow it with few limits. Online lenders add further complication, because some claim they are not bound by the borrower's state law.
Why these loans are so expensive
The fee looks small relative to the amount borrowed, but the term is very short. A fee of $15 per $100 borrowed on a two-week loan works out at an annual percentage rate approaching 400%. The more serious problem is the rollover cycle: because the full balance is due at once, many borrowers cannot repay and pay another fee to extend. Research by the CFPB has repeatedly found that a large share of payday loan fees are paid by borrowers who take out many loans in sequence. Auto title loans carry the same structure with the additional risk of losing your vehicle.
Better alternatives to consider
- Payday alternative loans (PALs) from federal credit unions: small-dollar loans with a regulatory cap on the application fee and interest rate, far cheaper than a payday loan. Find a credit union at mycreditunion.gov.
- Community Development Financial Institutions (CDFIs): mission-driven lenders offering affordable small loans to people who struggle to access mainstream credit — find one at cdfifund.gov.
- Employer programs: some employers offer earned wage access, payroll advances or emergency hardship grants at little or no cost.
- Asking the biller directly: utilities, medical providers and landlords frequently offer payment plans, and nonprofit hospitals are required to maintain financial assistance policies.
- Local emergency assistance: dial 211 for community action agencies, faith-based funds and utility hardship programs in your area.
- Government assistance: if you are waiting on SNAP or another program to start, ask about expedited processing and emergency assistance.
If you already have a payday loan
Do not take out another loan to cover an existing one — that is the mechanism by which a single loan becomes a cycle. Contact the lender and ask about an extended payment plan; some states require lenders to offer one, and some lenders offer them voluntarily. Talk to a nonprofit credit counseling agency, which can look at the whole picture. If you gave the lender authorization to debit your bank account, you can revoke that authorization with the lender and your bank in writing, though revoking it does not cancel what you owe. If a lender has broken the rules, file a complaint with the CFPB at consumerfinance.gov/complaint and with your state attorney general.
General guidance only — not regulated financial advice.