These loans are small (less than $500) and unsecured, meaning the borrower doesn't have to provide collateral. Normally the borrower writes a check to the lender, who agrees not to cash the check until a later date - normally the day the borrower gets his or her next paycheck.
Because they have already spent part of their paycheck by the time it arrives, users of payday loans often take out another loan, and another and another. This cycle of debt can be extremely difficult to break. While mostly used by lower-income consumers, a payday loan is about the most expensive way to borrow money, with annual percentage rates (APR) in Missouri averaging more than 400 percent.