A payday loan is primarily characterized by what feature?

The primary characteristic of a payday loan is that the repayment is due on the next payday. This type of loan is designed to provide quick access to cash for borrowers who need immediate funds, often to cover unexpected expenses. The model typically allows individuals to borrow a small amount of money, which they agree to pay back in one lump sum on their next payday, usually within a couple of weeks.

This structure is significant because it creates a fast turnaround for both the borrower and the lender. borrowers receive necessary funds quickly, while lenders expect repayment soon after the borrower’s next income arrives. This convenience also comes with high-interest rates, reflecting the short-term nature and the risks involved for lenders.

In contrast, a long-term repayment structure, required collateral, or involvement of multiple payments are not typical of payday loans. They emphasize quick, short-term borrowing over longer commitments or repayment schemes.