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