Some states have capped the interest rate on short term loans, creating a less bountiful market for a lender, which in turn makes for less borrowing opportunities for the consumer. However, several big banks offer a service that are just like a short term loan, and with a lower interest rate, MSN reports. It's not uncommon for a short term lender to charge an annualized interest rate of more than 400 percent. The American Bankers Association released a statement saying that banks that offer deposit advance programs have experienced a high demand for the service by clients. Consumers, it seems, prefer the simplicity of taking out a loan from their own bank, instead of an outside agency. Banks have reported that clients who use this service are mainly doing so in order to avoid overdrafts and address short term credit requirements. "In reality, direct deposit advance programs enable customers to live within their means by permitting them to manage the timing of the receipt of those means," ABA said. Short term lenders may have to decrease their interest rates if they want to compete with big banks.