DURHAM — Every month, thousands of North Carolinians run out of money before their next paycheck. Many turn to payday lenders to get an advance. However, those short-term loans can be very costly.

Unable to make a car payment, Larry Smith needed an advance on his paycheck, so he went to a payday lender. When he could not pay the first loan back, he took out another.

"What you would do is you would go to one and get that money back, and then you go to another. You go to pay the other one off to get that money, so it's like a cycle," he says.

Payday loans are high interest short-term loans backed by postdated personal checks that borrowers promise to repay out of their next paycheck. In North Carolina, the law only allows $300 to be borrowed at any one time. The maximum fee that can be charged is 15 percent.

UNC Professor Michael Stegman believes lawmakers need to come up with a better way to monitor the system so consumers do not find themselves in an endless cycle of debt.

"The problem comes up when people can't afford or find that $300 using the next paycheck, and they've got to do it again," he says. "We need to find a way to prevent people from abusing the system through using multiple payday lenders."

Almost three years after his first payday loan, Smith is still trying to pay off his debt.

"I can see you getting into it and not knowing how to get out of it. They don't give you a way to get out of it," he says.

The president of theFinancial Service Centers of America, Inc.says he agrees the payday lending law needs some fine tuning to make sure consumers are better protected. However, he believes payday lenders provide an important service to the community. The payday lending law in North Carolina expires on July 31.