Payday loan is a loan that has to be repaid on the next borrower's payday. Payday loans are known under many different names like payday advance, cash advance, and paycheck advance. Most of payday loan companies don't require credit check, and they are for relatively small amounts – usually no more than $500. The payday loan principal has to be repaid on the next borrower's payday plus interest and various fees. The annual percentage rate of an average payday loan is usually in several hundred percent neighborhood, which is really high by any traditional lending standards. Many consider payday loan lending practices to be a predatory lending.
Payday loans have become very popular in Canada and USA, as many consumers find themselves cash-strapped and unable to arrange any other form of financing. Because of their popularity and their high costs, payday loans have become target of many regulatory bodies across Canada and USA. For example in Canada any interest rate above 60% per year is considered criminal.
Payday loans should be considered as a credit source of last resort and should be avoided if possible. Payday loans are one of the most expensive methods of borrowing, which usually makes the financial situation of the borrower worse, instead of improving it.