What Is a Payday Loan? How Do They Work?

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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
Payday Loan Definition
How Do Payday Loans Work?
Principal Amount
Repayment Terms
Interest Rates
Other Fees
What Can a Payday Loan Be Used for?
Typical Requirements for Payday Loans
Proof of income, such as a paystub or Social Security benefit statement Form of government-issued identification Bank account information or a check
Pros and Cons of Payday Loan
Pros of a Payday Loan
Cons of a Payday Loan
Alternatives to Payday Loans
Short-Term Personal Loans
Paycheck Advance
Seek Credit Counseling
Looking for a Short-Term Loan? Explore Personal Loan Options With Lantern
About the Author
Sarah Li Cain is a finance writer and podcast producer focusing on topics such as credit, insurance, investing, and real estate. Her work has appeared in major publications such as CNBC Select, Forbes, Redbook, and Business Insider.
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