When you see an advertisement for cheap loans online, it can be very tempting to click on through and see what all the fuss is about. Have you heard of payday loans before? Most of these cheap online loans are actually no different than a payday loan, sometimes called payday advance, or cash advance. While these forms of borrowing are hotly debated, it would seem that they are not well understood by the public.

1. Who might use a payday loan, and why?

The majority of people seeking a cheap online loan are white women between the ages of 25 and 44. Most users choose to take out their loan via a storefront lender, and about 20 percent choose to take out their loan online.

Studies have shown that if people were unable to borrow a loan, 81 percent of them would instead cut back on expenses. The remaining 19 percent of people would either delay payment on other bills, call on friends and family, or sell a personal possession. People choose this kind of loan for many reasons, but one of the biggest is that it is fast and easy method to get a few hundred dollars.

2. What are the risks of a cheap online loan?

A cheap online loan generally comes with a very high APR. If you are unable to pay the lender back within the time specified, usually two weeks, then you can quickly rack up even more debt, making it more difficult to pay the lender back and handle your other expenses. Ideally, a small loan should be taken out for an emergency situation. The reality is that most people take out a loan for recurring expenses. The average person taking out one of these loans will be indebted for almost half of a year.

3. What are the benefits of a cheap online loan?

If you are in a tough spot, and desperately in need of a small loan, using an online loan center is many times your only option. Furthermore, when borrowing responsibly, a person can avoid going into further debt as a result of their loan.

It is important to note that not everyone can have access to this form of borrowing. Several states have banned these loan centers either online or in stores, for various reasons. Arizona, Arkansas, Connecticut, Georgia, Maryland, Massachusetts, New Jersey, New York, North Carolina, Pennsylvania, Vermont, West Virginia, and Washington D.C. are among those states with bans or strict lending laws.

Ultimately, an individual must decide for themselves what they are comfortable with. The cheap loan has been around for a long time, and with its current availability online, more people than ever before will have to make that decision.