In Partnership with Our Nonprofit Partner GreenPath Financial Wellness
It often starts with a moment of panic: a bill you didn’t plan for and not enough money to cover it before payday. In that stress, you may think you need to get a personal loan. Payday loans can feel like a lifeline—fast, simple, and there when you need it. But payday loans are not like other personal loans. Before you move forward, it helps to understand how payday loans typically work for many borrowers.
What Payday Loans Are (and Why They’re Risky)
A payday loan is a small, short-term loan (often a few hundred dollars) that is supposed to be repaid by your next payday. On the surface it looks like an easy way to cover a gap in your cash flows. However, the costs can be eye-popping!!
- Most payday loans carry extremely high interest rates—often as high as 391% APR—alarmingly higher than other kinds of credit.
- Because the repayment period is so short (usually about two weeks), and the loan is probably larger than your bi-weekly paycheck, many borrowers struggle to pay back the loan when it comes due. And here comes another application fee.
- Many customers end up repeatedly borrowing: A 2024 report from the California Department of Financial Protection and Innovation found that about 27% of payday borrowers took out 10 or more payday loans in a year, and more than 75% of the total fees charged in the state came from people with seven or more transactions.
You are forced to keep “re-applying” and paying the fees for the same loan. When you add all that up, payday loans can do more harm than good—especially if you’re already living paycheck-to-paycheck or managing other financial obligations.
How Payday Loans Can Impact Your Financial Health
Payday loans are designed for speed, and that can come with trade-offs that aren’t always obvious at first. Before you get a personal loan like a payday loan, remember:
Short repayment windows:
Paying back a loan in just a couple of weeks can be harder than it seems—especially if bills, rent, or food costs are already tight.
Risk of ongoing debt:
Rolling over or taking another payday loan to cover one you can’t repay on time adds up fast. Many borrowers end up paying more in fees than they originally borrowed.
High interest and fees:
Even a modest amount borrowed can end up being expensive when annualized. These aren’t small handling fees—they’re significant costs that can erode your budget.
Alternatives to Consider
Before opting for a payday loan, explore these more sustainable and potentially safer, options:
Short-term small loans from us
Like many other community banks in New York, we offer small dollar loans or “payday alternative loans” with much lower interest rates and better terms than payday lenders. These can be easier to repay, have sensible repayment periods and don’t trap you in cycles of renewing debt. Learn more about our Credit Builder Loan, and how to apply for personal loan with us.
Personal lines of credit or credit builder loans
If you qualify, these products offer credit on better terms and give you time to pay it back without extreme costs.
Talk to a financial counselor
Take advantage of Free financial counseling with our nonprofit partners, Ariva and GreenPath Financial Wellness. They can help you map out a budget, prioritize expenses, and explore debt repayment options you may not have considered.
No-Shame Support
Financial challenges happen to everyone. The key is choosing the path that protects your stability. If you’re considering a payday loan because you’re struggling to make ends meet, pause and consider this: there are resources that can help you find alternatives—and likely at a lower cost.
Get in Touch With Us:
✔ Ask about small-loan products.
✔ Explore budgeting and planning support.