---
title: "Payday loan: definition | Desert Rock Capital"
url: "https://www.desertrockcapital.com/glossary/payday-loan"
description: "Federal rules do not define 'payday loan' by name; the corresponding federal term is a 'covered short-term loan,' for which, under the CFPB's Payday Lending."
---

Loan types

# Payday loan
All lending terms
Definition

Federal rules do not define "payday loan" by name; the corresponding federal term is a "covered short-term loan," for which, under the CFPB's Payday Lending Rule, "the consumer is required to repay substantially the entire amount of the loan within 45 days of consummation."

A payday loan is a short-term loan structured to be repaid in one payment on the customer's next payday, commonly within two to four weeks. The customer typically provides a postdated check or authorization for an automatic withdrawal, and the lender charges a flat fee for the advance. If the customer cannot repay the full amount on the due date, the loan may be renewed, extended, or rolled over by paying an additional fee, which is known as a rollover. Payday loans are regulated differently from state to state, and some jurisdictions limit or prohibit them. An installment loan, which spreads repayment over a set schedule, is a commonly cited alternative.

Source: [CFPB Payday Lending Rule, 12 CFR 1041.3(b)(1)](https://www.law.cornell.edu/cfr/text/12/1041.3). This definition is general educational information, not legal or financial advice.
Related

- [Compare: vs. a payday loan](/compare/payday-loan)
- [Payday loan alternatives](/compare/payday-loan)
- [Signature loans](/services/signature-loans)
- [No credit check loans](/services/no-credit-check-loans)
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