Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Feb 15, 2012

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Payday loans are the most despised version of financing in the world of lending and borrowing. When there is this intense and publicized hatred for these loans, we have to ask ourselves why they even exist, or are allowed to continue to exist.


The most obvious answer is because there is a demand for this type of financing. For all of the bad stories we hear in the news media, there are countless others that would be considered good and helpful. But those don’t make for good or interesting reads, so they’re rarely publicized.


Another possible answer—though one that would likely receive much criticism—is that payday loans are necessary.


As Paul Crayston, a media officer at Money Advice Trust, explains “No one takes a payday loan out of choice, they take it because they’re forced to or are unaware of other alternatives,” reported Money News.


Payday loans provide short-term cash financing to anybody with a paycheck and a bank account. Credit score doesn’t matter, and financial history—or lack thereof—isn’t considered important to these lenders. As a result, payday cash advances are necessary for those who encounter unexpected bills or expenses, and who cannot get cash from other institutions.


Some argue that without this type of service, the millions of cash-strapped customers who take out payday loans every year would be forced to turn to other means of obtaining money. If these quick, no credit loans were unavailable, then when banks and credit unions refuse to lend money to a borrower, that borrower will be forced to turn to less-than-legal means of obtaining money. More specifically, loan sharks would begin to plague and prey upon our nation’s financially struggling population.


Because, after all, ridding supply doesn’t rid demand.