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Jan 4, 2014 Imagine you take out a payday loan for $500, but when your next payday comes you find you are out of money again, and are unable to pay the loan back. Let's say you finally pay the loan back in twelve months, a year later. At the end of the year, you would owe $2500 – $2000 in interest, all from a loan 

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What is a payday loan? A payday loan is a small unsecured loan designed to meet someone's financial needs until their next payday. Essentially, someone is making out a check for the advanced loan amount, plus a fee, to be held until their next payday. These quick payday loans are simple to obtain through an easy