Payday loans have tight restrictions and regulations under government reforms that set limits on how much payday lenders can charge you. Because of this regulation, and because most payday loans have loan terms of less than a year, payday lenders cannot charge you interest the way other lenders do, since other lenders calculate their rates annually. They therefore just charge a percentage of the amount borrowed. They can make references to the effective comparison rates and annual percentage rate (APR), but it's important to remember that payday loan interest rates are based on a shorter loan term than the standard APR calculation of 365 days.