Beware the iniquitous Payday Loan

A payday loan, sometimes called a paycheck or a payday advance, is a small, short-term loan that is meant to cover expenses until the coming payday. Loans are between $100 and $500, usually on a two-week term and have interest rates in the range of 390 percent to 780 percent. The loans are also referred to as cash advances, though that term can also refer to cash provided against a prearranged line of credit such as a credit card.

Congress passed a law in October 2006 that caps lending to military personnel at 36%. The Defense Department called payday lending practices "predatory", and military officers cited concerns that payday lending exacerbated soldiers' financial challenges.

Some federal banking regulators and legislators seek to restrict or prohibit the loans for all borrowers, because the high costs are viewed as an unnecessary financial drain on the lower and lower-middle class populations who are the primary borrowers.

Lenders say these loans are often the only option available to consumers with bad credit or who cannot get a bank loan, credit card, or other lower-interest alternatives. Critics counter most borrowers find themselves in a worse position when the loan is due than they were when they took the loan.