Payday loan.
In plain English
The mechanics: borrow a few hundred dollars, write a post-dated check or authorize a debit for the amount plus a fee, due on payday. A typical fee of $15 per $100 for two weeks sounds small and annualizes to roughly 391% APR. The trap is the rollover: most borrowers can't spare the full lump on payday, pay another fee to extend, and the CFPB's research found the large majority of payday loan volume comes from borrowers in long sequences of repeat loans, not one-time uses.
01Why it matters
Payday lending concentrates in the exact moments and neighborhoods where alternatives feel out of reach. Knowing the real APR, and the cheaper options (payment plans, credit union small loans, even a card's ugly cash advance), changes the decision math.
02The math, step by step
$400 borrowed at $15 per $100: $460 due in two weeks. Roll it over four times because the $460 never fits the budget: $240 in fees paid and the original $400 still owed. The math is the formula above, lived.
03What this is NOT
The fee is not the price; the price is the fee against the time. "$15 per $100" markets as 15%, but over two weeks it's an annualized rate near 400%, which is the honest comparison against any other option.
04Receipts
Every figure on this page is sourced to a primary document. Tap to open the original.
Plain-English answers from our glossary. Receipts included. Never advice.
Educational tool. Answers come only from ClearMoneySchool's published glossary and are not advice. Why we never give advice