The incredible growth of stores that offer cash advance loans has astonished legislators and consumer advocacy groups, who worry, with good reason, about the fact that consumers are lining up to borrow cash at rates of interest of up to 500% per year. While stores that offer payday cash advances numbered in the few thousands as recently as 1999, there are now more than 20,000. In several cities, there are several stores on just one block, and in spite of the large number of businesses that provide them, there is no competition in supplying these loans. Every store in a given city is charging the same interest rates as every other store.

The rates aren’t cheap. In exchange for borrowing a sum that ranges from $100 to $500 for two weeks, a consumer has to repay the loan plus a fee that varies from $10-30 for every $100 borrowed. If he or she can’t pay back the loan after two weeks, the loan can usually be renewed for an additional fourteen days, if the consumer pays the fee a second time. The short term of the loans frequently makes it challenging for consumers to pay back, and a lot of of them end up paying the fees over and over. Or they take out another loan from another store in order to pay back the first one. And yet, in spite of the high prices, the businesses are profitable and these lenders provide billions of dollars in cash advances each and every year.

If the loans are so pricey, why are the businesses so profitable?  Why do so many people apply for cash loans?

The answer can be summed up in one word – convenience. Taking outbank financing could save debtors a lot of cash, but bank financing and other, more formal, kinds of lending require some resources that a lot of would-be borrowers simply do not have. The lure of payday loans can be attributed to the typical requirements of the stores that offer them, which regularly require no more than the following:

The customer be an adult
Have a current job that they have held for a minimum of three months
Have a checking account.
Be a U . S . citizen.

Have no other outstanding advances from that store (in a few states, from any other store.)
That’s it. You can get a loan with no credit check. Lenders aren’t looking to see your Fico score. They do not care about other payday loans you have. They don’t care if you had a recent bankruptcy. They do not care if you have paid your Visa bill late three times in the last six months.  If you meet the conditions above, they will almost certainly lend money to you, which is something that no bank will do with as little to go on as the minimum requirements that most advance loan stores require. It should be no surprise that these stores are effective; they will accept the business of just about anyone.

That business comes with a price, though. That price is an average rate of interest of 391% per year. The success of these stores indicates that convenience and ease of use is an essential consideration in borrowing cash.