Payday lenders are under fire constantly. Consumer advocates and politicians like to take shots at payday lenders. They use words like “usury” or phrases like “loan sharks.” They compare today’s payday lenders to mafia-connected loan sharks of the early 20th century.

Still, opponents fail to recognize something: there wouldn’t be payday lenders if people didn’t need small short-term loans. People needed them in the early 20th century, and people still need them in the early 21st century.

Back then, the loan sharks were also called “salary buyers.” They’d “buy” a person’s upcoming salary. They’d do it for a hefty fee, often charging as much as $30 per $100 borrowed. In today’s terms, that’s about twice what most payday lenders charge.

So, are payday lenders loan sharks or legitimate businesses? It depends, at least in part, on your own situation. If you don’t ever need a short-term loan, you might not have an opinion at all. If you need them often and have paid tons of fees, you might resent them and claim usury as well.

However, if you’re like many people who use payday loans as an occasional way to meet immediate expenses, you probably see them as a legitimate and even helpful business.

The question of whether these businesses should be shut down isn’t even the right question. The real question that consumer advocates should ask is, “what alternative can be offered to payday loans?” Instead of encouraging legislation to ban payday loans, they should focus their energies on finding alternatives. Whether that’s legislation that encourages traditional lenders to make smaller-dollar and shorter-term loans, or whether that’s some sort of charity work, it’ll probably do more good in the long run.

The biggest danger to consumers when it comes to payday loans seems to be the idea of rolling over. When you roll over a payday loan, you take out another loan on your payday to cover the previous loan. When you do this, the amount that you pay in fees grows and grows over time. Breaking the payday loan cycle is the only way to be sure you’re not being taken advantage of.

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