A "Payday loan", also referred to as "paycheck advance" or "payday advance", is a loan that is extended to the borrowers to give them financial aid for covering their expenses till a day prior to their next payday. It is a short-term loan that is spread over the duration between two consecutive paydays of the borrower. The major advantage of payday loans is its prompt and secure transactions which are available at your own convenience. The regulations imposed on payday loans vary from forcing strict rules which have to be abided by the payday lenders to not permitting payday lending at all. There are more than 10,000 payday loans lender outlets spread over across the states in USA and a number of online payday loans being offered online.

There are two ways to apply for a payday loan,

> Retail Payday Loan:

The borrowers can apply for a retail pay check advance by approaching a "Payday Lending Store". This store will offer a cash advance for a small amount for a duration lasting till the next payday of the borrower. The retail lender will levy charges in lieu of the amount lent, which typically ranges from 15 to 30 percent of the total amount over the stipulated time frame.

In return of the advance paycheck, the borrower needs to sign a post-dated check for the lender which carries the original amount in addition to the charges fixed by the lender. This gives the lender, the right to withdraw the said amount from the borrower's account in the event of his failure to return the borrowed amount.

A recent pay slip needs to be submitted by the borrower as a proof of his employment and his capacity to repay the loan.

> Online or Internet-based Payday Loan:

The online payday loans are promoted through advertisements, electronic mails, referral links etc.

The potential borrower needs to visit the recognized websites offering the payday loan services.

An online application form requires the interested borrowing party to enter his basic employment information and the essential bank details. Along with submitting the form, the borrower also needs to fax the documents required. The lending charges are debited electronically from the borrower's account after the payday loan has been approved.

In case of the payday loans, the lenders need to have a legal approval to provide the loan services. The lenders are recognized by the government by issuing them the license to conduct the payday loan transactions.

Payday Loans have some shortcomings; some of them are a non-asset accumulation drive which can spell losses for the low-income strata of the society, levying high-interest rates to pocket profits, not following the regulation laid out by the law and many other criticisms.

In a measure to correct these shortcomings, the alternative practices that are being followed are payday loans from the employers, overdraft protection to avoid check bounces, pay check advances from credit cards, direct loans from acquaintances and similar other consumer-friendly alternatives have been adopted.