If someone stated that they would likely lend you $500 today in the event you repaid them with $5000 a year from now, would you take it? What if the repayment amount were only $2500? Might that strike you as a good deal? This might seem like a crazy amount to repay on a small loan, but that, in effect, is what thousands of consumers do every day once they take out a cash advance.

Payday advances, also identified as cash advance or 30 day payday loans, are short term loans that typically last about two weeks. In exchange for borrowing relatively little sums ranging from $100-500, the consumer pays a fee that may vary from $10-40 per $100 borrowed for the two-week loan. The borrower writes a postdated check for the borrowed sum plus the fee, that the lender may cash two weeks later.

These charges might appear relatively small, but when viewed as an annual percentage rate, they actually range to anywhere between 250-1000% each year. That is an astronomical amount of interest in a world exactly where a credit card loan at 25% is regarded as to be high. And however, the payday loan business is thriving and there are now some 23,000 stores in America that offer some form of these 30 day payday loans.

Why do individuals take out such loans? The main factors are comfort and a lack of better alternatives. These stores are now so common that there are frequently several of them on a single block. They do not do credit report checks and they'll lend money to pretty much anyone with a steady job. And the borrowers have a tendency to be people who don't have access to other borrowing choices, like credit cards, friends with money or a local credit union that offers brief 30 day payday loans.

Defenders of these financial goods say that they're merely offering a product that the public wants. That may very well be accurate, as these businesses are performing extremely nicely. What remains to be answered is whether the public really wants to borrow money at 500% per year. In all likelihood, they're doing so only because they can't discover a much less expensive option. Anyone who needs a short term loan is more than welcome to visit a payday loan store to get one. But any possible borrowers ought to understand that they making use of one of the world's most expensive forms of lending.

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