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Payday Loans Are Like Renting Money

When you get an instant cash advance, keep in mind that it is not like a normal bank loan.  A normal bank loan is designed to generate a long-spanning income source for a bank.  A place that can give you cash today is not like that.  Payday loans are much more like renting a car or a boat or something for a few days. You are literally renting their money.

Imagine that you are renting a big, inflatable slide for your kid’s party.  Those big things are often seventy five dollars for every hour that you have that thing inflated in your backyard.  Some companies even have you paying fees for things like gas to get to the location. Here’s the funny thing– most people have no problem with the concept that the person they’re paying seventy five dollars an hour to deserves it. Seventy five dollars an hour for your kid to have a lot of fun at his or her party with a giant inflatable slide is completely reasonable.

Now that same person borrows (read–> rents) five hundred dollars from a payday company to cover an emergency trip to their parent’s house in Florida when they live in Ohio. The fee for five hundred dollars is fifty dollars to rent that money for two weeks. To that person, the concept of paying fifty dollars to rent out money for two weeks so they can go to Florida seems unreasonable, because they’re not thinking in terms of rent.

Because people are used to comparing short term loans to long term bank loans instead of short term rents, fifty dollars seems insanely high when you compare it to bank loans.  The thing to keep in mind is that short term loans should be compared to renting equipment, not compared to long term loans. There are many reasons why fees are what they are. Many people don’t pay back their loans, which drives the cost of lending money to people up.Short term loans are not like long term loans, and need to be compared on different rules for the market to be fair.