While payday loans have been popular for a long time in the USA, they are a relatively new service for UK borrowers, and a lot of people aren't certain just what they involve. What with all the arguing over whether they're a valuable service or only a form of legally accepted loan sharking, it's a good idea for any United Kingdom resident thinking of applying to know precisely what they're signing up for.

Many of us run out of cash nearing the end of the month to some extent, and have to economize a bit by cutting back on socialising or other sorts of non-essential expenditure. This is an absolutely normal (if irritating!) fact of financial life for most of us who are working and are paid every month. Occasionally still, running out of cash can be more severe than this if there are needed expenses to be paid such as an unexpected bill or repair cost.

Some people utilize the overdraft facility of their bank accounts to provide for a bit of space when money is tight, but these days many people are always overdrawn and approaching their limits, so this may not be an option.

A contrasting fashion of keeping you going until your next wage is to make use of a credit card, both for purchases and cash withdrawals. There are numerous difficulties with this, not least the fact that credit cards are a less than inexpensive type of credit, and it's easy to build up a huge account balance which can have a miserable effect on your long term financial health.

If neither of the last two options are right for you, then a payday advance loan may well be worth considering. Basically, these loans are available to virtually everyone with banking facilities and a debit card, and who has a job. When you take a wage advance loan out, the lender will transfer the amount you ask for straight into your bank, normally inside 24 hours of your application being authorized. On your application you will have provided your debit card information, and the loan company will use these to automatically clear your loan on your next payday, as well as their fees.

And in that lies one of the main problems with pay day loans – the fees.

This kind of borrowing is ill-famed for being high-priced, and eye-watering interest levels of 1000% or even much higher are perfectly normal. These APR figures are perhaps a little misguiding, as the APR system is designed for credit with a longer repayment period than cash advance loans where the term is measured in days rather than years. Even so, these loans are quite expensive, with a cost of 20%-2% of your loan amount more often than not the going rate.

The next serious problem is that paying off your loan and fee is likely to result in you being skint once more at the end of next month, and it's simple to get into an expensive downward spiral of applying for a loan each month – which is when those high interest rates will really bite.

So, is there any upside to a cash advance loan? Yes, but only in truth for an honest crisis where there is no other choice. If you're relying on these loans to pay for your day to day life, then it would be a better idea to analyze your budget and ascertain where you can economize, or to restructure your debt using a consolidation scheme or similar to set free some surplus cash every month.

Martin writes for a fast payday loans provider in the UK, and you can read more about the pros and cons of wage advances at his site as well as applying online.