I have got the inside scoop on payday loans so listen up. I have been investigating them for quite some time to learn the truth, and now I will expose the truth once and for all about payday loans. Read on to see payday loans exposed!

People have been complaining about payday loans, or cash advances, for a long time now. This prompted my thorough investigation. I will post a common myth about payday loans and then dispel it.

Myth: Payday loans are a ripoff because of their astronomically high rates.

Truth: APR, or annual percentage rate, measures your interest rate in years. A 12% APR means that in one year, you will pay 12% of the amount you borrowed in interest, or 1% every month. So each month, your balance due back that you owe increases by 1%. The APR on payday loans is usually 350% or more. That is crazy high! But think about this- payday loans are designed to have a maximum term of one month. This means you should never borrow a payday loan for longer then 30 days.

Now 350% APR translates to roughly 1% per day. If you have the loan 14-30 days, you will only pay 14-30% of the loan in interest. In other words, it only costs you $50 to borrow $500 for 10 days. Does 14-30% sound like a lot to you? Of course not, but that is the honest truth about payday loans. You will never pay 350% in interest. Laws prevent them from growing interest after three months anyway, so the most you can pay is around 100% in interest, if you are an irresponsible borrower.

Myth: Payday lenders prey on the poor and minorities.

Truth: Does Wal-Mart prey on the poor and minorities? Do flea markets prey on the poor and minorities? Do thrift stores prey on the poor and minorities? These stores sell products designed for the poor, who tend to be minorities in this country. No on in payday lending preys on anyone. They offer a product. This product is nothing a rich person would be interested in. They can just withdraw cash from their accounts. And on the flip side, no poor person is interested in a Ferrari, the product is not priced at their level. A cash advance is something that people short on cash take advantage of. So no, they do not prey on the poor. They offer a service that only people with little cash would need to take advantage of.

Myth: Payday loans are an example of predatory lending.

Truth: You cannot be thrown in jail by a payday lender. Some states essentially don’t require you to even pay them back. With the ridiculous default rate in payday lending it is a wonder they make money at all. The sad thing is, all their rates, fees and rules are clearly posted in their stores. That is the law. Anyone who gets a payday loan knows exactly what they are getting into. So ask yourself this- if someone goes and buys a used DVD that says “No refunds,” and the DVD they take home doesn’t work well, who is at fault? Is it the vendor of damaged goods, or the person who thought it would be a good idea to buy damaged goods? Is this person really being taken advantage of?

And so it is with payday loans. They are a good product that can be used responsibly and to the benefit of the borrower. Then there are those who are not responsible borrowers and don’t take advantage of the benefits, but feel they got taken advantage of. Did they really?