Tuesday, August 07, 2007

Payday Loans= Most Evil Possible Thing in the Universe

So today when I made a payment to my Bank of America credit card I decided that I would purchase nothing for myself this month. This will enable me to move the $100 for 'shopping' into 'debt reduction.'
This is because I want to pay off BOA as soon as I can so that I can discontinue my tacit support of payday loans.

According to the National Consumer Law Center's report: Utilities and Payday Lenders: Convenient Payments, Killer Loans both of the banks which hold my two credit accounts are the owners of exploitative lending centers.As you can see on this cute little chart. (Should expand if you click it. Via consumerist.com)

In case you are saying to yourself, caveat emptor, I would like to remind you heartless bastards that the interest rates on these loans are about 390% to start.

Here is a breakdown of these ridiculous loans via All Financial Matters:

Let’s say times are tough and Jack needs $100 to fix his car. Jack goes down to the local payday loan company and they agree to give him a loan. So Jack writes a check for $125 and gives it to the payday company and they give him $100. Two weeks later, Jack gets paid and the payday loan company cashes Jack’s check, closing out the deal.

Now, take a wild guess as to how much the APR (Annual Percentage Rate) is on Jack’s loan…

How about 651.79%!

Here’s how that’s figured:

APR = i × (365 ÷ n)


i = periodic interest rate, which is 25% in this example ($25 fee ÷ $100 = .25 or 25%)
n = time period of the loan, in this case 14 days

Filling in the numbers, our formula looks like this:

APR = .25 × (365 ÷ 14)

APR = .25 × 26.0714

APR = 6.5179 or 651.79%


Here you will find a payday loan branch manager telling the fine folks at The Center for Responsible Lending about tricking poor people into exploitative loans.

And, lest you forget, as was discussed before (and in Congress, and on TV, and on every website ever) payday loan centers target the poor and those on fixed incomes, most specifically: soldiers and their families, minorities, recent immigrants, the elderly, the infirmed, and of course single mothers.

Finally, if after all of this, you need a fuzzy story to make you not hate the universe and all in it- here you go: a man described as the "internet batman."


payday loan said...

The charges on a payday loan can add up, if someone doesn's pay on time. Other than that, payday loans are a good option for someone that doesn't want to get caught up with credit cards debts. They can also help in a tight situation, its quick, and most places are open longer hours than banks.

qtilla said...

Payday loans exploit the poor.

Payday loans charge ridiculous interest rates, even if you pay on time.

Payday loan companies make money because they know that poor people have to juggle their finances and that they will always drop the ball.

Payday loans offer a quick fix, but in the long run feed into American's credit dependency and trap those most in need of long term financial solutions in a revolving door of fees and borrowing.

Not with my money. Thanks though.

LaLa said...

In the UK payday loan companies are pretty much unregulated and some of the companies charge more that 1000% APR. They use agressive marketing and actually offer discoutn for referring friends and call you continously to encourage you to roll over.

Then, if people struggle with paying back these huge interest rates they are unsympathetic.


qtilla said...

That is just so sad. It makes me so frustrated that billionaire CEO's are perched on the back of soldiers and single moms. It is disgusting.

Anonymous said...

I don't believe that anyone forced Jack to take a payday loan; I am also pretty sure that Jack knew exactly how much it was going to cost before taking the $100

qtilla said...

Well, since Jack has to eat and put a roof over his head, and possibly his family to take care of, he didn't have a choice.

Bank of America does.

We all have choices to make. None of us are forced to take advantage of others to make money. Some of us choose to. Choosing to make money by taking advantage of the poor is wrong.

Just because it is legal does not make it right.

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