What exactly are payday loans?

A payday loans are just a very short term loan that can be used to cover any expense that you incur prior to when you next get paid. In generally they are very quick to apply for, and the fund can be released to you usually within 24 hours. The majority if payday loan lenders will be able to release future loans to you in less than one hour.

The majority of payday loans have a term of up to 30 days, although there are some that offer longer terms. Having said this, it is important to understand the real cost of the loan, and that the interest will continue to accrue at quite a high rate until the loan is repaid.

Whilst the interest rate varies greatly by payday loan lender, you can expect to pay around an extra 20% of the loan value in interest. As an example if you were to borrow $500, your repayment at the end of the loan would be $600 ($100 or 20% interest on the principle borrowed).
Some lenders will offer instant cash, and many payday loan lenders will also be able to instantly cash checks for you, again taking about a 20% cut of the value of the check.

Payday loans certainly have their place, and offer a way to access emergency funds in a shorter time than applying for a regular loan or credit card. That being said, it would be wise to only use them where you have to as the interest charged is alarmingly high (around 240% per annum, or 20% per month) and thus should only be used for an emergency, and not for regular expenses such as food or entertainment.

Quite a lot of lenders will allow you to apply instantly online, but I would advise anyone considering this type of loan to shop around to find a lender which offers the lowest interest rate, or the best terms to suit your needs.