My Experience With Payday Loans

Written By:

Edited By:

Oct 12, 2024

Joy Wallet is advertiser-supported: we may earn compensation from the products and offers mentioned in this article. However, any expressed opinions are our own and aren't influenced by compensation. To read our full disclosure, click here.

Payday loans are short-term loans with high interest rates. These are small-dollar loans ranging from $100-$1,000. The loans are meant to cover short term needs in between your next paycheck. The due date is typically the next payday, and it is repaid with a single automatic payment.

In this article

How do payday loans work?

Loans can be issued in person or online, depending on your state laws. Some lenders require you to authorise automatic repayment to receive the amount. Payday loan borrowers often only need to provide a photo ID, bank account information, and proof of income to qualify. Many lenders don’t do a credit check to ensure you can repay the debt.

Loan fees can range based on your state, but are often $15-$30 per $100 borrowed, which puts takes the annual percentage rate (APR) to almost 400%. That means for a two-week payday loan of $500, your repayment costs could be around $650.

Unfortunately, what happens to a lot of people is that due to the high interest and fees, even if you can repay the debt, the high-costs eat into your next paycheck. You are then likely to seek out another loan to get you through until the next payday, and get stuck in a debt trap.

Debt Management Simplified

Millions struggle with debt. We help them move on with their lives.

End your debt stress with a proven, affordable debt relief program. Our consultants will guide you through every step.
Everyone’s financial situation is different. That’s why we start by giving you a free debt analysis and create a custom solution based on your unique needs and goals.
Let us help you solve your debt problems and move forward with improving your overall financial health.

Not available in CO, HI, ND, OR, RI, VT, WA, WV, WY, MN, DE, IA.

Freedom Debt Relief

My experience with payday loans

As a young parent in my twenties, my husband and I had full-time jobs while my husband also attended college. Our daughter was in full-time daycare while we worked. Once all our bills were paid, we would be left with about $100 a week to cover any additional costs. I was constantly worried about making ends meet.

After an unexpected car repair drained our bank account, I was worried about having enough money to pay for any other expenses before our next payday. We had two credit cards but both were maxed out. I started searching online for short-term loan options because I didn’t know what else to do.

I knew how high interest rates were on payday loans, but I convinced myself I would only use it this one time. My plan was to keep the money in my account as an emergency fund and easily pay it back when our paycheck came in.

I applied for a payday loan and was extended $300 in a matter of minutes. I uploaded a copy of my most recent pay stub and entered my checking account information. I felt relief flood over me when I saw the money pop up in my bank account.

When payday came around, I was thrilled that I hadn't used any of the payday loan amount and quickly paid it back. Unfortunately, the interest rate dug into our already incredibly tight budget, leaving us less than $100 until the next payday. I found myself wanting that $300 cushion back just in case. This is where the cycle began.

This pattern went on for a few months. I was so ashamed because I knew how predatory the practice of payday loans was. On the flip side, I was also a young mother who was worried about paying for diapers and formula. I didn’t feel like I had any other options.

How I got out of the cycle of debt

Thankfully, I have a birthday that falls around the holidays. That year I asked for cash gifts from family and friends, telling them I was saving up for something big. I did not explain that I was hoping to use the cash to get out of that debt cycle.

With those generous gifts, I was able to finally get out from underneath the payday loans and start a small emergency fund. I knew saving an emergency fund and getting out of credit card debt would help prevent me from ever needing to consider payday lending again.

Debt Management Simplified

Millions struggle with debt. We help them move on with their lives.

End your debt stress with a proven, affordable debt relief program. Our consultants will guide you through every step.
Everyone’s financial situation is different. That’s why we start by giving you a free debt analysis and create a custom solution based on your unique needs and goals.
Let us help you solve your debt problems and move forward with improving your overall financial health.

Not available in CO, HI, ND, OR, RI, VT, WA, WV, WY, MN, DE, IA.

Freedom Debt Relief

Payday loan alternatives

I lost hundreds of dollars in payday loan interest, maybe more. Being a young parent with daycare costs, medical bills, and everyday expenses meant money was tight—but I didn’t know about alternatives that could’ve helped me. Instead of using payday loans, I wish I would have considered these other options:

Start a side hustle
Personal loans
Look for a better paying job
Apply for government assistance
Visit a food pantry
Ask family for help
Get a second job
Debt consolidation
Sell stuff online
Credit card cash advance

Are payday loans considered predatory?

Predatory lending is broadly defined as loaning money without consideration to the borrowers’ ability to repay the debt. Payday loans fall under that definition. Americans with bad credit may be more enticed by these loans because you rarely need a good credit score to get cash. With APR's as high as 400%, payday loan debt can quickly become overwhelming.

What if I need help with payday loans?

If you are concerned about your ability to repay your loan on time, contact your loan providers immediately. You may be able to create a payment plan or negotiate terms to be able to pay back the loan. Also consider asking for help from credit counseling agencies who can assist you with managing your debt.

The bottom line

Before you consider payday cash loans to help you out, take a hard look at the loan amount, additional fees, due date, and your financial situation. Payday loans may look like a helpful solution when you need quick cash, but the high fees and short repayment cycles benefit payday lenders more than borrowers.

Joy Wallet is an independent publisher and comparison service, not an investment advisor, financial advisor, loan broker, insurance producer, or insurance broker. Its articles, interactive tools and other content are provided to you for free, as self-help tools and for informational purposes only. They are not intended to provide investment advice. Joy Wallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. We encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Featured estimates are based on past market performance, and past performance is not a guarantee of future performance.

Our site doesn’t feature every company or financial product available on the market. We are compensated by our partners, which may influence which products we review and write about (and where those products appear on our site), but it in no way affects our recommendations or advice. Our editorials are grounded on independent research. Our partners cannot pay us to guarantee favorable reviews of their products or services.

We value your privacy. We work with trusted partners to provide relevant advertising based on information about your use of Joy Wallet’s and third-party websites and applications. This includes, but is not limited to, sharing information about your web browsing activities with Meta (Facebook) and Google. All of the web browsing information that is shared is anonymized. To learn more, click on our Privacy Policy link.

Images appearing across JoyWallet are courtesy of shutterstock.com.

Holly is a freelance writer who recognizes that there isn’t a one-size-fits-all approach to personal finance. She is passionate about entrepreneurship, women in business and financial literacy. When she is not working, she is testing out new recipes, tasting the newest Trader Joe’s finds or binging the latest true crime podcast. She resides in Utah with her husband, two daughters and dog, Max.

Share this article