The use of payday loans has been a controversial issue for many years. While millions of Americans take advantage of this financial solution every month throughout the country there is growing opposition to system claiming that lenders charge unfair interest rates at the expense of the small consumer who needs the cash.
While it is true that interest rates are considerably higher (in terms of APR) than standard bank loans, payday loans aren’t meant to replace long term bank loans and shouldn’t be compared in terms of APR. Obviously someone who requires a long term solution is better off going with a bank loan and it is definitely an unhealthy habit to depend on payday loans month after month.
However, as a short term solution in specific times of need, the actual cost of a payday loan is actually cheaper than any other financial solution. It doesn’t pay to take a bank loan if you only require money for a few days, both in terms of time and in terms of money as just issuing a bank loan often involves setup fees and is much more complicated process to apply for than a payday loan. Also, payday loans are usually intended for smaller sums of up to $1,500 which don’t justify traditional bank loans.
