People who take out payday loans often know they are a bad deal

A third of Americans don't have the cash they need to cover a $500 emergency, according to a 2023 Federal Reserve survey.

Supporters of payday loans say banning them would harm low-income Americans

Many argue for a federal policy that would cap interest rates for these loans, but payday lenders say that would make it impossible for them to make money, effectively forcing them to close up shop. As a result, some argue that the policy would prevent low-income, unbanked, and traditionally high-risk borrowers from accessing credit when they need it. (Some users may experience a paywall.)

Payday lenders usually require borrowers to post-date a check or provide access to an electronic bank account

If borrowers can't pay back the loan, they can be subject to overdraft fees from their bank and other fees from the payday lender—further exacerbating the debt borrowers face.

Research shows that payday lending advertisements target minorities

A University of Houston Law Center study found that despite only making up 23% of payday loan recipients, Black people appear in 35% of advertisements. Similarly, 77% of the physical payday lending and auto title lending storefronts in the study targeted racial minorities.

Federal law requires payday lenders to meet certain transparency requirements, but states have their own regulations

Federal law treats payday lending like other lines of credit, meaning it requires lenders to disclose the loan's interest rate and its "finance charge," a dollar amount expressing the full cost of the loan. But states have their own regulations around payday lending, hence why it isn't allowed in every state and why the industry looks so different across the country. These regulations are often part of a state's usury laws.

The costs and fees for a payday loan include a 'finance charge'

Payday lenders typically make money via finance charges, a percentage or dollar amount that the borrower owes the lender per $100 borrowed. While the finance charge can range from $10 to $30 for every $100 borrowed, this would equate to an annual percentage rate of almost 400 percent for a two-week loan.

Payday loans typically have higher interest rates than cash advances

Cash advances and payday loans are both short-term loans that allow borrowers to access cash quickly. Payday loans are much shorter-term, often due in two weeks or by the borrower's next paycheck, and have much higher interest rates.

Some argue that advance payday apps aren't markedly different from payday loans

Some apps, like EarnIn, allow users to get money from their paycheck in advance. These apps access users' banking information, allowing the company to immediately take back any borrowed money and track users' financial situations to evaluate their risk. Unlike traditional payday lenders, these apps often waive the right to sue users who don't pay back the initial principal and don't charge interest, but rather ask users for a tip. (Some users may experience a paywall.)

Payday lenders are more highly concentrated in neighborhoods with high poverty rates

Research from the Federal Reserve Bank of Chicago shows that payday lenders in Illinois were more densely populated in zip codes with high poverty rates. The data also shows that payday lenders were more likely to cluster in zip codes where the highest percentage of residents are minorities.

Meet a payday lender who tried to fight the industry

Phil Locke once ran more than 40 payday lending stores in Michigan before walking away from lending in 2012. Locke left because he said he felt guilty about being a predatory lender. He tried to become a consumer protection advocate and influence reform, but ended up returning to the industry. (Some users may experience an email wall.)

Payday lenders spent more than $5M on lobbying efforts in 2025

Payday lenders largely oppose rate cap policies, increased borrower risk-assessment requirements, and other regulations that would effectively shutter their industry. In 2025, the payday lending industry lobbied against interest rate limits on payday loan apps.

Modern payday lending came about in the late 1990s

In the early 1900s, unlicensed "salary lenders" used to give consumers one-week loans at annualized percentage rates of more than 100%. But wage garnishment and financially abusive practices led some states to create special licenses for lenders and implement rate caps to protect consumers. In the 1990s, a series of deregulations in various states opened the door for the modern payday lending industry to take off.

Banks have increased small loan programs since 2018, upping competition for payday lenders

One of the reasons payday lending flourished for nearly two decades is that most banks charged high overdraft fees and didn't offer small loans. However, since 2018, banks have increased their small loan options. Supporters say this provides safer alternatives for consumers, as banks are subject to more regulatory measures and are less likely to allow consumers to keep rolling over loans.

Over 25% of Americans regret using BNPL due to unexpected costs

Almost 24% of buy now, pay later users have missed payments, with younger users (32% of 18- to 29-year-olds) being more likely to fall behind on payments than their older counterparts. (Only 12% of adults age 60 or over had done the same.)

'Usury' is the act of lending money at an excessively high interest rate

Laws regulating predatory lending are called usury laws and vary from state to state. Payday lending has historically been exempt from some states' usury laws, and some lenders have found loopholes in state laws or business structures that allow them to provide short-term loans with high interest rates.

Tribal lenders have charged up to 600% APR on short-term loans

Some Native American tribes use their exemption from state legislation to bypass regulations on usury laws. Similar to payday lending, some tribal lenders have charged up to 600% APR on short-term loans.

Houston, Texas depends heavily on payday loans

In 2024, people in Houston took out payday loans at a higher rate than the national average. In Texas, the average payday loan interest rate is 664%.

BNPL's biggest risks include the ability to stack multiple loans simultaneously

Buy now, pay later loans come with some risks, such as the hefty late fees that can add up over time in the case of missed payments. However, personal finance experts say that tactics like reading the fine print can help consumers use these financial tools more safely.

Military bases were once targets for payday loans and other predatory lending

The Military Lending Act of 2006—a federal law—capped the interest a lender can charge an active-duty soldier at 36% after the Department of Defense criticized payday lenders for targeting young soldiers with high-interest, short-term loans. However, many towns near military bases still have predatory businesses that critics say take advantage of army families living paycheck to paycheck. (Some readers may experience a paywall.)

Title loans are a type of short-term loan with high interest rates

Title loans allow borrowers to use their vehicle's title as collateral for a short-term loan. Similar to payday loans, title loans often have high interest rates and are mostly structured to last around 30 days. If title loans aren't repaid, the lender can take possession of the borrower's vehicle.

A 'debt trap' refers to the need for loans or credit to cover the expenses incurred from other debt

Debt traps can be caused by unforeseen expenses or inadequate savings and can be a brutal cycle to break. At the end of 2025, total household debt in the US reached $18.8T, according to data from the Federal Reserve of New York.

Google banned ads for loans due within 60 days and interest rates exceeding 36% or higher

In 2016, Google said it would stop allowing payday lenders to advertise on the search engine. According to the company, this decision was made to protect users from deceptive and harmful financial products.

In 2014, there were more payday loan stores than McDonalds

That year, there were more than 20,000 payday lenders in the US, according to the St. Louis Federal Reserve, and 14,267 McDonald's locations. Politicians and consumer advocates frequently cited this statistic as a selling point for increased regulation.

More than 3 million student loan borrowers were in default at the end of 2021

More than 3 million student loan borrowers were in default at the end of 2021. While default rates have declined since pandemic-era payment pauses, failing to pay off student debt can still have serious consequences, from a low credit score to the government withholding wages.

Borrowers were increasingly defaulting on private credit loans as of early 2026

Risks in private credit investing include the industry's lack of transparency and the ability of businesses to borrow more than a bank might allow against their debt. Some borrowers in early 2026, for instance, likely did not expect interest rates to be so high for so long, which could be contributing to an uptick in defaults.

Read about the situations where a high-yield savings account doesn't make sense

While financial experts often recommend high-yield savings accounts, one expert argues that prioritizing adding more money to one doesn't make sense for someone who has a lot of high-interest debt or isn't taking advantage of their company's 401(k) match.

Buy now, pay later loans from 'BNPL' companies—which allow online shoppers to buy something immediately and pay for it in installments—are becoming more popular, with nearly half of millennials and Gen Zers using them.

Six bills experts say you shouldn't put on autopay

Autopay has plenty of benefits, such as helping to avoid late fees and streamlining your bill paying process. But some experts say there are a few types of bills that you shouldn't autopay, especially if you're not confident you can pay these bills in full each term. The list includes utility bills and annual subscriptions. Read the full list here.

How to get out of debt

This article provides a few helpful tips for getting out of debt, such as learning more about the debt itself and asking for better interest rates. It also explains the popular "debt snowball" and "debt avalanche" methods for getting out of debt. Curious to learn more? Read the full article here.

Even high earners are living paycheck to paycheck

While roughly 14% of American households make $200K or more per year, many of them still don't feel rich. For instance, more than 60% of people with salaries over $300K per year still struggle with credit card debt.

BNPL may be adding a layer of debt that doesn't show up in economic data

Given somewhat limited regulation in the BNPL space, data about its usage is limited—many BNPL firms have resisted sharing information about user purchases, finances, and more thus far. As more people begin using buy now, pay later services, experts are concerned about whether BNPL is adding a new layer of "hidden leverage" to the economy.

Consequences of a bad credit score

A bad credit score can lead to spending roughly $100K more on a typical mortgage. Poor scores also prevent you from getting certain jobs, apartments, and more, hindering you from building wealth in the long term.

What is buy now, pay later?

The buy now, pay later industry allows consumers to buy something immediately and pay in installments, typically without the need for applications or credit scores associated with credit cards. BNPL has boomed in the last decade, led by fintech companies Affirm, Klarna, and Afterpay, which have targeted young adults. Some critics say BNPL is a reinvented version of payday loans that allow borrowers easy access to cash with relatively few barriers.

In 2025, the 'two strikes and you're out' rule took effect to protect consumers from repeated attempts to withdraw money

After years of being delayed by litigation, a 2024 US Supreme Court ruling upheld a law that prevents lenders from attempting to take payments from accounts with insufficient funds more than twice without reauthorization. This tactic is commonly used by payday loan companies, which technically require repayment on the day borrowers receive their paychecks.

Some borrowers end up with higher student loan balances than they started with, even after years of paying, due to 'negative amortization.'

Student debt has a widespread economic impact

Student debt is no different than the big rent or car payment that comes out of someone’s paycheck every month: Its presence affects that household’s purchasing power. Multiply that household by the 43 million Americans who had outstanding federal loan debt in September 2023, and student debt’s impact becomes considerable.

Find out ways to get lower rates on private loans, such as applying with a cosigner.

Buy now, pay later loans typically split payments into 4 installments

While they're marketed as "interest-free" loans, BNPL loans often have penalties for late payments, such as late fees in varying amounts depending on the BNPL company used to make the purchase. BNPL users often pay 25% of the BNPL loan at checkout, and then pay the remaining balance in three more installments over the course of roughly six weeks, depending on the BNPL company and agreement.

Some experts argue it's not a good idea to pay off federal student debt early if a borrower must sacrifice retirement or emergency savings in order to do so.

The Consumer Financial Protection Bureau is looking closely at BNPL

Given the lack of data around BNPL services in comparison to other financial products such as credit cards, the CFPB has conducted research to better understand BNPL products and how they could harm and benefit consumers.

Roughly 37% of first-time US home buyers have student debt

When those people have extra money, they might wonder: Is it better to pay down my mortgage or my student loans first? This article argues that the answer depends on each loan's interest rate, among other factors.

Affirm's COO recently said that the company believes the credit card is 'going the way of the VHS tape'

Some people use buy now, pay later apps as an alternative to credit cards. BNPL services have a lower barrier to entry than credit cards—many frequent BNPL users have low credit scores.

North Carolina was the first state to ban payday lending

In 2001, the North Carolina state legislature let a 1997 law that permitted the small-dollar loans expire—effectively banning payday loans. In 2005, the NC bank commissioner ruled that Advance America, a payday lending company, had been operating in the state illegally.

BNPL companies typically make money via merchant fees rather than interest

When a merchant partners with a buy now, pay later app, consumers are more likely to spend more money with that merchant—meaning that the merchant is willing to pay a small fee in exchange for the ability for customers to pay with buy now, pay later.

Paying a fee to delay paying back a loan in full is called 'rolling over' the loan

Borrowers sometimes roll over loans when they aren't able to pay back the full principal balance and accrued interest. A rollover extends the amount of time the borrower has to repay the loan, but does not decrease the amount of money the borrower has to pay back.

From wage garnishment to a credit score hit, a multitude of consequences can occur if a borrower doesn't repay their student loans.

Calculate: Do you need to file for bankruptcy?

About 77% of American households had some debt at the end of 2023. However, when debt becomes crushing, it's time to consider a management plan or a bankruptcy filing. This calculator helps explore whether debt is manageable based on inputs like medical debt, payday loans, and gross annual income.

Retail investors are not professionals—they invest their own money

For retail investors, the stakes may seem higher and more personal. Critics say that this dynamic means that retail investors are more susceptible to behavioral biases that could lead them to make poor decisions when it comes to buying and selling assets. For instance, fear of missing out could cause a retail investor to buy a stock that is popular but not a financially worthy investment.

Some people make too much money to file for Chapter 7 bankruptcy

Chapter 7 is the most popular type of filing for individuals needing relief. However, to be eligible, debtors must pass an income means test. At the most basic level, they must prove that their average monthly income over six months is below their state’s median. But there are exceptions.

To continue selling mortgages, agencies that determine how risky a loan is gave high ratings to homebuyers regardless of their actual risk portfolio.