What type of loan provides cash based on the borrower’s paycheck?

A payday loan is specifically designed to provide borrowers with short-term cash based on their next paycheck. These loans are typically small, high-interest loans that borrowers use to cover urgent expenses until their next pay period. The premise of a payday loan is that the borrower will repay the amount borrowed, including interest, when they receive their upcoming paycheck.

This type of loan is characterized by its quick approval process and minimal requirements, often requiring just proof of income and a checking account. Since the amount lent is directly linked to the borrower's income, it is intended to be a temporary solution to immediate financial needs.

In contrast, an installment loan would involve a fixed amount that is paid back over time in regular payments, a home equity loan is secured by the borrower's property, offering larger sums based on the equity in a home, and a personal loan can be either secured or unsecured but is generally not tied to the timing of paychecks.