A seemingly endless amount of companies now offer payday loands (note: please correct my spelling to "loans", keyword was spelt incorrectly). A quick Google search will show you a massive list, but amongst the more well-known are Wonga, KwikCash, and QuickQuid. However, with interest rates often reaching an eye-watering 4214%, are these companies moral? Or are they the modern day equivalent of a loan-shark?

First of all, to the uninitiated, we should explain what a payday loan is. A payday loan is a small, short-term loan which is linked to the borrower's payday.

The borrower can apply online, or at a retail outlet, with the APR of the loan (annual percentage rate) varying between 1700% to 4200%. A typical loan of £100 with a 28 day term would have the customer pay approximately £139 back.

Recently Wonga began sponsoring Newcastle United Football Club, with their name appearing on their shirts. This caused outcry from politicians, saying that Newcastle United should be more responsible in who they choose as sponsor.

The outrage came because they believe companies like Wonga give out loans to people who cannot afford them. However other football teams are sponsored by tobacco, betting and even beer companies, so is it just a knee-jerk reaction?

But with a default rate on payday loans of about 20%, it is easy to see why people think payday loan companies seem to be making a quick buck out of vulnerable people.

For those against such companies, there is hope. Not-for-profit companies such as London Mutual Credit Union, are taking on payday-loan companies. They charge much lower interest rates, starting from just 26.8%. A customer taking out a £400 loan with a typical payday loan company would pay back about £520, whereas with CUOK it would be just £408.

However there is a catch in that CUOK's catchment area only covers certain areas of London, and other credit unions require you to become a member and save there for a few months before you can take out a short-term loan.

Despite all the criticism, there are obviously millions of cases of payday-loans legitimately helping people who are not vulnerable and just need a quick loan. But with campaigners such as as the influential Martin Lewis saying that more regulation is needed for payday loan companies.

Payday Loans - In need of change or legitimate business model?