Together with the globalization, consumerism, and the opening of the economic frontiers even in some of the most closed markets like the industrial markets in Asia, especially in China, making loans and taking money from the banks is more and more customary for the modern man. Together with the making of the loans in the banking system, in the past years, a new trend seems to gain more and more popularity, mostly in Europe and America, which is the system of the payday or short term loans. The payday loans are based on a simple philosophy of functioning, namely that if you need an amount of money that is no bigger than 1000 American Dollars or British Pounds, for a short period of a couple of weeks maximum, a payday lender can lend you this amount of money, which much less strict control than in the case of the banks but also with a much higher interest rate.

The main advantage of the payday lending businesses would be that of being able to lend amounts of money that someone needs for a house purchase or something like this, expecting to get back the money with the next salary of the person who took the loan. For the person who is taking the loan, the advantage consists in being able to obtain a small to medium amount of money that is needed for an urgent errand or an essential purchase. The main disadvantage consists in the interest imposed on the loan, which percentage wise is, of course, bigger than in the case of lending money from a bank. Let us not forget, though, that while a bank might charge you the interest and refund for years, the short term or payday loans are settled for a couple of weeks or a month at most.

Some of the managers of the newly entered on the market payday loaning businesses actually even suggest the fact that if we take into consideration the commissions for extractions and the other types of commissions that the bank system charges us with, the higher interest of payday loans suddenly does not seem as big compared with a random bank loan.

For the low wage persons, that cannot afford due to their financial profile, taking a bank loan over a longer period, the short term or payday loans seem like the only valid solution. The real problem appears when you are in the impossibility of paying the loan when the day comes, and you need to make another payday loan with a bigger interest to cover the one that you just missed spending. It is in here that the greatest disadvantage of payday loans stands, and it is this aspect the most significant loss for the customer and the largest gain for the company. It is true that the balance can very fast incline towards transforming the situation in the advantage of the person who is taking the loan if we come to think that these types of payday loans are minimally checking the solvability of the people to whom they lend money to.