What Is A Payday Loan & How Does It Work?

A payday loan is a very short term loan which is usuallly for a small amount, perhaps a few hundred which is used by the borrower to tide them over until their next payday which is when the payday loan is due to be repaid. The way a payday loan usually works is that the payday loan is paid to the borrrower in cash and the borrower gives a post dated cheque which is usually post dated to the date of the borrowers next payday. This cheque includes the principal amount of the loan plus the interest on the payday loan. This cheque is then paid in by the lender on the day the cheque is dated unless the borrower has already paid off the payday loan with the lender. Some payday loan providers charge quite high rates of interest so it best to only going for a payday loan if you cannot get other cheaper forms of borrowing.