Find a Payday Lending Company
We’ll match you with the right company that knows exactly what you need.

Choosing the best payday lending services

Last Updated April 2024

When you’re strapped for cash and need money fast, what do you do? Some people turn to a payday lending service. You can find these businesses in many cities across the nation, but how do they operate? And how do you decide which one to use?

We answer these questions and more in our payday lending services shopping guide. At BestReviews, we’re keenly aware that citizens today are inundated with products, deals, and other special offers. In a sea of consumer options, it can be hard to wade through the gimmicks and jargon to find what’s right for you.

That’s why we put together this shopping guide: to help you figure out what payday loans are all about and how to proceed if you would like to apply for one.

A payday loan is a short-term loan based on the customer’s income.

How does a payday loan work?

If you’re thinking about taking out a payday loan, here are the steps you can expect to follow.

Plan your actions carefully

A payday loan can be a lifesaver, but if you don’t do it right, it can bog you down financially. Theoretically, payday loans are supposed to be short-term emergency loans for nominal cash amounts. For example, a customer may need $150 to replace a damaged tire or $250 to pay an unexpected traffic ticket.

Ideally, the total amount of any payday loan is repayable with one paycheck. But because many people have fixed living expenses like rent, they may not be in a financial position to repay the loan in a timely manner. Left unpaid, a payday loan rolls over, and the debt grows higher.

This is why many financial experts discourage the use of payday loans unless the situation is truly an emergency.


The post-dated check you provide the lender cannot be cashed by the lender until your next pay date. On that day, you can choose to pay your debt in full or request an extension. But buyer beware: when you ask for an extension, you accrue more fees.

We researched the best consumer practices when it comes to obtaining a payday loan from a lending company. Here is what we found.

Find a Payday Lending Company
We’ll match you with the right company that knows exactly what you need.

What to bring and what to expect

If you’re a first-time borrower, you may not know exactly which documents to bring to a payday lending institution. Generally speaking, a loan representative will want to see proof of steady income (pay stubs, bank statements), photo ID, and possibly proof of residency (utility bill, personal letter). Some lenders may also ask for a list of personal references.

What most payday lenders will NOT do is run an official credit check on applicants. Remember, this is not a loan based on your ability to pay. Rather, it’s a loan based on the lender's ability to collect the debt.


If a borrower fails to repay the entire amount of the loan plus fees within one or two paycheck cycles, the rollover can become significant. When expressed as an annual percentage rate (APR), some payday loans can carry interest rates as high as 9,000%.

Contrary to popular belief, most payday loan institutions do not automatically approve every applicant who walks through the door. Successful loan applicants are usually full-time employees who meet the company's minimum income criteria.

Once the lender processes your information, he or she will explain your options. This means spelling out the exact terms of the loan, from the maximum amount available to the repayment terms and fees. If you agree to the amount and terms of the loan, the lender will ask for a post-dated check for the total cost of the loan and service fees.

Many people find themselves in need of a few hundred dollars to address an emergency debt, and traditional banks aren’t always able to meet that need.

Why are payday loans controversial?

Traditional banks lost some of their ability to generate small personal loans after a series of failures and federal interventions during the 1980s and 1990s. The Glass Steagall Act created even more federal restrictions on the banking industry's lending practices. This led directly to the rise of private lending companies not regulated by Glass Steagall or the FDIC. These lending institutions could make small personal loans using anything from the borrower's paychecks to a car title as collateral.

Since that time, the payday loan industry has continued to blossom.

High interest rates

Payday loans are not home mortgages or small business loans, which are backed by federal agencies and have regulated interest rates. Payday loans can have exorbitant interest rates when calculated as an Annual Percentage Rate (APR).

Find a Payday Loan Company
We’ll match you with the right company that knows exactly what you need.

The check-cashing services provided by alternative lending institutions address an important need for people who, for whatever reason, do not have their own bank account.

Vulnerable clientele

Very few people who earn $350 a week can afford to repay a $215 personal loan all at once without sacrificing other critical expenses. Many payday loans accumulate rollover fees at least once, and payday lenders know this.

The practice of offering immediate loans with no credit checks is very appealing to low-income workers who need emergency cash. Critics of the payday loan industry condemn this easy access to high-interest loans as “predatory lending.”

In defense of payday loans

Many payday lenders strongly disagree with the negative assessments they hear from critics. They believe they are addressing the financial needs of an underserved demographic: low-income workers who cannot qualify for traditional bank loans or other emergency aid.

And the fact is, many customers do repay the entire loan on time, so the so-called “predatory” rollover fees and exorbitant APRs don’t affect them.

Choose a Payday Lending Company
We’ll match you with the right company that knows exactly what you need.

Repayment terms

Because customers walk out of the lender's office with cash in hand, they can usually address the issue that necessitated the loan in the first place. The traffic ticket is paid in full, the bad tire is replaced, the dentist bill is paid off.

The last obligation between a borrower and his/her payday lending company is (hopefully) on the borrower’s next payday. The lender should still possess the post-dated check, and the borrower should have the full amount of the loan in cash. This should be a simple one-to-one exchange, the check for the cash. However, if there is a balance remaining on the original loan, the lender may offer an extension for an additional fee.


It’s illegal for payday lenders to loan more than the amount of an applicant's anticipated paycheck, and borrowers are strongly discouraged from holding more than one payday loan at a time.

Check-cashing services

Some payday loan professionals offer their clientele check-cashing services. In this scenario, the lender cashes a personal or commercial check for a small fee.

Many people who do not have traditional bank accounts prefer this convenience. To their way of thinking, cashing a check with a payday loan company is preferable to the overdraft fees and other charges traditional banks mandate from customers who are overdrawn.

Surprising facts about payday and title loan services

1. According to a Pew Charitable Trust study, an average payday loan customer will take out eight loans of $375 in his or her lifetime and pay at least $520 in interest before paying off the original principle.

2. Military payday loan customers are protected by laws which cap interest rates at 36%.

3. A Consumer Federation of America study found that 80% of payday borrowers rolled over or borrowed new loans within 30 days.

A typical payday loan involves a customer borrowing a small amount of cash (generally under $500) from a licensed lending establishment. This could be a brick-and-mortar store, an online presence, or an extension of another company, such as a pawn shop.

4. Payday lending is forbidden in 14 states, including much of the northeast and Washington, D.C.

5. Borrowers who default on payday loans cannot be arrested, and these personal loans do fall under bankruptcy laws if the borrower files for such protection.

6. According to a Milken Institute report, the calculated annual percentage rate (APR) on payday loans in the U.S. runs from a low of 196% in Minnesota to a high of 574% in Mississippi and Wisconsin.

Find a Payday Lending Company
We’ll match you with the right company that knows exactly what you need.