| If someone told you that they would lend you | | | | that offer some form of these cash advance |
| $500 today if you repaid them with $5000 a | | | | loans.Why do people take out such loans? |
| year from now, would you take it? What if | | | | The primary reasons are convenience and a |
| the repayment amount were only $2500? Would | | | | lack of better alternatives. These stores |
| that strike you as a good deal? This may | | | | are now so common that there are often |
| sound like an insane amount to repay on a | | | | several of them on a single block. They |
| small loan, but that, in effect, is what | | | | don't do credit checks and they will lend |
| thousands of consumers do every day when they | | | | money to pretty much anyone with a steady |
| take out a payday loan.Payday loans, also | | | | job. And the borrowers tend to be people who |
| known as cash advance or quick cash loans, | | | | do not have access to other borrowing |
| are short term loans that typically last | | | | options, such as credit cards, friends with |
| about two weeks. In exchange for borrowing | | | | money or a local credit union that offers |
| relatively small sums ranging from $100-500, | | | | short term loans.Defenders of these financial |
| the borrower pays a fee that can range from | | | | products say that they are simply offering a |
| $10-40 per $100 borrowed for the two-week | | | | product that the public wants. That may very |
| loan. The borrower writes a postdated check | | | | well be true, as these businesses are doing |
| for the borrowed sum plus the fee, which the | | | | very well. What remains to be answered is |
| lender may cash two weeks later.These fees | | | | whether the public really wants to borrow |
| may seem relatively small, but when viewed as | | | | money at 500% per year. In all likelihood, |
| an annual percentage rate, they actually | | | | they are doing so only because they cannot |
| amount to anywhere between 250-1000% per | | | | find a less expensive option. Anyone who |
| year. That's an astronomical amount of | | | | needs a short term loan is more than welcome |
| interest in a world where a credit card loan | | | | to go to a payday loan store to get one. But |
| at 25% is considered to be high. And yet, | | | | any potential borrowers should realize that |
| the payday loan business is thriving and | | | | they making use of one of the world's most |
| there are now some 23,000 stores in America | | | | expensive forms of lending. |