 TITLE: What Is a Payday Loan and How Does It Work? CONTENT: How Do Payday Loans Work?\n-------------------------\nPayday loans function differently than personal and other consumer loans. Depending on where you live, you can get a payday loan online or through a physical branch with a payday lender.\nDifferent states have different laws surrounding payday loans, limiting how much you can borrow or how much the lender can charge in interest and fees. Some states prohibit payday loans altogether.\nOnce you're approved for a payday loan, you may receive cash or a check, or have the money deposited into your bank account. You'll then need to pay back the loan in full plus the finance charge by its due date, which is typically within 14 days or by your next paycheck.\nPayday loans come with a finance charge, which is typically based on your loan amount. Because payday loans have such short repayment terms, these costs translate to a steep APR. According to the Consumer Federation of America, payday loan APRs are usually 400% or more.\nDespite the high costs, The Economist estimates that roughly 2.5 million American households take out payday loans each year. There are a few reasons for this popularity. One is that many people who resort to payday loans don't have other financing options. They may have poor credit or no income, which can prevent them from getting a personal loan with better terms.\nAnother reason may be a lack of knowledge about or fear of alternatives. For example, some people may not be comfortable asking family members or friends for assistance. And while alternatives to payday loans exist, they're not always easy to find.\nMany people resort to payday loans because they're easy to get. In fact, in 2015, there were more payday lender stores in 36 states than McDonald's locations in all 50 states, according to the Consumer Financial Protection Bureau (CFPB).\nPayday lenders have few requirements for approval. Most don't run a credit check or even require that the borrower has the means to repay the loan. All you typically need is identification, a bank account in relatively good standing and a steady paycheck. END