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GLOSSARY

Canadian Financial, Real Estate and Mortgage Glossary

How often this word is used
 
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38% - Moderately

Payday Loan


Synonyms:advance, cash advance, payday advance
Filed Under: financial-banking
Tags: banking
 

Definition of payday loan

payday loan
1. A short-term unsecured loan taken out to bridge the gap between paycheques. Before being approved for a payday loan, the borrower must provide payroll and employment records. Because payday loans carry a high risk to the lender (with a default rate of 10-20%) the interest rates charged on payday loans are extremely high. The payday loan industry is described by some as usury, taking advantage of those who are in desperate need of money. Also known as a "cash advance," or a "payday advance."

Related Terms and Acronyms:

  • loan   Letting another party use something of value temporarily.
  • loan shark   A lender that provides loans at usuriously high interest rates, often ensuring repayment with the threat of force.
  • predatory lending (PL)   Lending practices that are unfair, deceptive or fraudulent.
  • title loan   A loan that uses a car as collateral.
  • unsecured loan   An advance of money that is not secured by collateral.
  • usurious rate   An interest rate that is unnecessarily high or well above legal rates. For example, sometimes intangible property taxes are applied to income from usurious rates.
  • usury   Illegal, excessive interest.

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