Payday Loans Are The Worlds Most Expensive Cash

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

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