The Short Version
What is a payday loan, really?
A payday loan is a small cash advance — usually $100 to $1,000 — that comes due in one piece on your next payday. The lender takes a post-dated check or an authorization to debit your account, hands over the cash, and charges a flat fee for the privilege. Nothing about that structure is complicated. The price is where borrowers get lost.
The fee looks small because it is quoted per hundred dollars for a term measured in days. A $15 fee per $100 over two weeks sounds like 15% — but a rate only means something over a year, and annualised it is 391% APR. That single conversion, applied before you sign, is most of what this site exists to do.
The second thing to know is that the lump-sum structure, not the fee, causes most of the damage. When the full balance lands on payday and the budget can't absorb it, the loan gets rolled into a new one with a new fee. Regulators have documented borrowers paying more in accumulated fees than they originally borrowed. Our guides treat that cycle as the central risk, and our rating rubric scores every product against it.
Run the numbers on a typical loan and the cycle stops being abstract. Borrow $375 for two weeks at the going rate and the fee is $56.25. Renew it 3 times — a common pattern in regulator data — and you have paid $225.00 in fees while still owing the original $375. No single fee in that chain looks alarming. The chain is the problem.
Structure is also why the same dollars behave differently elsewhere. An installment loan at 90.0% APR sounds expensive — and often is — but each payment retires part of the principal, so the debt shrinks by design. A credit-union Payday Alternative Loan is capped at 28.0% APR by federal rule. Whether those doors are open to you depends on membership, credit file and timing, which is exactly what the guides walk through.
Start with the complete payday loans guide, compare cheaper routes in small loans, or skip straight to the calculator and price your own quote.