A payday loan is a short-term loan that is intended to cover a borrower's expenses until his or her next payday. It is also called a paycheck advance.The loans are also sometimes referred to as cash advances,eventhough that term can also refer to cash provided against a prearranged line of credit such as a credit card. Legislation regarding payday loans varies widely between different countries and between different states.
Some jurisdictions impose strict usury limits, limiting the nominal annual percentage rate(APR) that any lender, including payday lenders, can charge; some outlaw payday lending entirely; and some have very few restrictions on payday lenders. Due to the extremely short-term nature of payday loans, the difference between APR and effective annual rate (EAR) can be substantial, because EAR takes compounding into account.