A payday loan also known as paycheck advances, or payday advance is a small, short-term loans, which are intended for the borrower to the next payday. Loans are also sometimes referred to as cash advances, though that term can also refer to cash provided against a predetermined credit limit, such as credit cards (see cash advance). Legislation on payday loans are very different in different countries and the United States of America.
Some countries impose strict usury limits, which restrict the nominal annual interest rate (APR) to each creditor, including payday lenders may impose a total ban on payday lending, some of which have very few restrictions on payday lenders. Thanks to the very short-sighted nature of payday loans, the difference between APR and effective annual rate (EAR), may be significant, as is the mixing of the EAR. U.S. $ 15 to $ 100 to pay for the 2-week loan, the APR is 26 × 15% = 390% but the EAR (1.1526 – 1) × 100% = 3.685%. Careful reporting of the EAR or APR is quoted, it is necessary to make meaningful comparisons.
