Fast Cash Advances Are The Planet's Most Expensive Cash

If somebody told you that they would lend you $500 today if you repaid them with $5000 a year from today, would you take it? What if the repayment amount were only $2500? Would that strike you as a great deal? This may sound like an insane amount to repay on a little loan, but that, in effect, is what thousands of consumers do every day when they sign up for a payday loan.

Payday loans, also known as cash advance or 30 day payday loans, are short term loans that usually last about two weeks. In exchange for borrowing relatively small sums which ranges from $100-500, the borrower pays a fee that can range from $10-40 per $100 borrowed for the two-week loan. The consumer writes a postdated check for the borrowed sum plus the fee, which the lender might cash two weeks later.

These fees may seem relatively little, but when viewed as an annual percentage rate, they actually range to anywhere between 250-1000% each year. That's an substantial amount of interest in a world where a credit card loan at 25% is considered to be high. And yet, the payday loan business is thriving and you will find now some 23,000 stores in America that offer some form of these 30 day payday loans.

Why do people sign up for such loans? The primary reasons are convenience and a lack of much better alternatives. These stores are now so common that there are often a number of of them on a single block. They don't do credit checks and they will lend money to fairly much anyone with a steady job. And the borrowers tend to be individuals who do not have access to other borrowing options, such as credit cards, friends with cash or a local credit union that offers short 30 day payday loans.

Defenders of these monetary products say that they are simply offering a product that the public desires. That may very well be true, as these companies are doing very well. What remains to be answered is whether the public truly wants to borrow money at 500% per year. In all likelihood, they are performing so only because they cannot find a less expensive choice. Anyone who needs a short term loan is more than welcome to go to a payday loan store to obtain one. But any potential borrowers should realize that they making use of one of the world's most costly forms of lending.

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