For many, this economic situation means that it is difficult to make ends meet. Between inflation and the high cost of living, what should you do when you need a short-term means of getting cash? Some people turn to payday loans, finding the process fast and easy; however, payday loans are carefully designed to drag you deeper into debt, benefiting payday lenders and not your bottom line. Instead, opt for safe, accessible alternatives provided by your credit union so you can keep more of your hard-earned money.
Payday loans seem like an easy way to get quick cash when you’re in a financial pinch. The convenience of being able to walk into a storefront lender or apply online in minutes makes them an appealing option when you need money fast. But are payday loans really easier to pay back than other types of loans or credit options? The answer is complicated.
How Do Payday Loans Work?
Payday loans are a short-term loan with high interest rates that you pay back when you get paid again. You give the lender a check with a future date on it or permission to take the loan amount plus a fee out of your bank account. In most cases, the fees on payday loans add up to an APR of 400% or more.
When your next payday arrives, the lender will cash your check or debit your account to collect the amount due. The repayment period is usually two to four weeks.
Payday lenders don’t look at your credit or how likely you are to be able to pay them back. You can usually get a few hundred dollar payday loan as long as you have a bank account and a steady source of income.
Factors That Make Payday Loans Harder to Repay
While accessing payday loan funds is easy, repaying them can be challenging for several reasons:
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High fees and interest: The fees on a payday loan can range from $10-$30 for every $100 borrowed. This translates to triple-digit APRs, making the true cost of the loan exponentially higher than the amount borrowed.
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Short repayment terms: Payday loans typically must be repaid in full on your next pay date. For most borrowers, two weeks or a month isn’t enough time to come up with the lump sum needed to pay off the loan.
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Loan flipping: When the due date arrives and you can’t afford to repay in full, you can pay the fee to roll over or “flip” the loan into a new one. This leads to a cycle of debt that causes fees and interest to accumulate rapidly.
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Lack of underwriting: Payday lenders don’t assess whether you can realistically afford repayment. They may lend you more than your budget can handle.
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Single payment structure: Repaying the entire lump sum at once can be more difficult than making installment payments over time.
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Access to funds: Because payday lenders have access to your bank account, they can continue attempting to debit the amount due, triggering overdraft fees if you don’t have sufficient funds.
Factors That Make Payday Loans Easier to Repay
On the other hand there are some characteristics that can make payday loans easier to repay than other types of debt
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Small amounts of money: Most payday loans are only for a few hundred dollars. The smaller amount that’s due might be easier to handle than bigger amounts.
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Short terms: The two- to four-week repayment period limits how much interest can accrue.
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Single payment: You only have one due date to remember that aligns with your pay schedule.
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No penalties for early repayment: You can repay a payday loan early with no prepayment penalties.
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Quick access to cash The funds are deposited into your account quickly after approval, often by the next business day Fast access to cash can help you avoid missed bill payments or checks bouncing
Alternatives to Payday Loans
Though payday loans have some good points, they are still very pricey and not a good way to borrow money. Here are some alternatives that may be easier to repay:
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Payment extensions: Contact your creditors directly to request more time to pay bills. Many will work with consumers who are short on cash.
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Credit cards: Balance transfer or low-interest credit cards allow you to pay off debt over time with lower interest.
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Side jobs: Making money on the side via a side hustle or part-time job may help you cover expenses without borrowing.
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Loans from family/friends: People close to you might be willing to lend money without interest or provide more flexible repayment terms.
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Traditional loans: Personal loans from banks, credit unions, and online lenders offer lower rates and longer repayment periods.
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Paycheck advances: Some employers provide paycheck advances allowing access to earned wages before payday.
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Debt management plans: Nonprofit credit counseling agencies can set up DMPs that consolidate debt into one monthly payment.
The Bottom Line
Ultimately, payday loans can be deceiving. Their convenience and quick cash makes repayment seem easy. But when it comes time to pay, the lump sum due combined with high fees makes them difficult for most borrowers to pay off in such a short timeline. For this reason, payday loans are riskier and harder to repay than many other borrowing options.
What is a payday loan?
It can be challenging to find yourself short on cash with bills coming in. Some people turn to payday loans to cover their short-term expenses. Payday loans are typically for smaller amounts; under $500.
Payday loans usually don’t require a credit check and can mean quick access to cash. People may turn to payday lenders because they need money fast and feel they have no other option. But this comes at a hefty price. Payday lenders are not seeking to develop a beneficial long-term relationship with you. Your financial vulnerability is their opportunity to profit through high interest rates and fees that are deliberately difficult to pay off, further dragging you into debt.
What should I do instead?
You do not need to turn to a payday lender for a short-term loan. Credit unions provide safe, accessible options to get you the money you need to make ends meet. Earthmover Credit Union (ECU) offers unsecured and secured personal loans, and credit cards, with competitive interest rates and minimal fees. These products are easy to apply for and usually quick—some members are approved for funds within the same day.
For members who do have payday loans, paying them off quickly should become your first priority. The sooner you pay them off, the sooner you reclaim your finances.
Are Payday Loans Easy or Hard to Pay Off?
FAQ
What is the downside to a payday loan?
Payday loans can lead to debt collection issues. – Many payday lenders are debt collection-minded. They might also sell your debt to an actual debt collector.
How much would a $100 payday loan cost?
Payday lenders usually charge interest of $15-$20 for every $100 borrowed. Based on an annual percentage rate (APR), which is the same method used for mortgages, credit cards, auto loans, and other loans. – that APR ranges from 391% to more than 521% for payday loans.
Why would you be denied a payday loan?
… a low credit score, insufficient or irregular income, errors on the application, inability to verify income, outstanding payday loans, or bank account …Mar 5, 2025.
How much would a $1 000 payday loan cost?
Let’s say you take out a $1,000 payday loan with a $15 fee per $100 borrowed. That means you’ll owe $150 in fees alone, and you’ll be expected to repay the full $1,000 principal plus that $150 — or $1,150 total — in just two weeks. That’s a 15% fee on your loan, but when annualized, it equates to a nearly 400% APR.