Payday loans can have a annual interest rate of 400%, but people who take them don't look it it that way when they borrow $100 and pay back $115 in two weeks. Many fall into the trap of taking a second, third, or more loans to cover the shortfalls caused by the previous loans. University of Chicago economists Marianne Bertrand and Adaire Morse ran an experiment in which they explained the terms of payday loans in detail, and gave statistics on how the average borrower must continue getting loans.
Among the other 90%, some won't change their behavior no matter what, but many have no other credit options available. Link
In a nationwide experiment, Bertrand and Morse found that providing a clear and tangible description of a loan's cost reduced the number of applicants choosing to take payday loans by as much as 10 percent. Better information, it turns out, may dissuade borrowers vulnerable to the lure of quick cash while maintaining the option of immediate financing for those truly in need.
Among the other 90%, some won't change their behavior no matter what, but many have no other credit options available. Link
I work retail at $9/hr and get paid every two weeks. I have a credit card with a limit of $500. After paying for rent, food, gas, insurance, etc. there's never much left of my paychecks. Say one day my car breaks down and, in order to get to work to keep my job, I've got to get it fixed immediately. The repair bill comes to $900 and, even if I max out my credit card, I'm still short $100 and don't get paid for a week; what do I do?
Write a bad check - If I bounced a check to the repair shop, my bank would charge me $35 NSF fee. The repair shop would probably add another $25 to re-submit my check. Total cost=$60
Overcharge my credit card - If I went over my credit card limit, Chase would charge me $39 (and probably raise my interest rate to the max.) Total cost=$39 (and a ding on my credit report)
$100 payday loan - I live in Washington State, our laws allows a maximum fee of $15 to be charged per $100 borrowed for two weeks. Total cost=$15 (We've got a winner.)
So, I get a payday loan for $100, get my car, and pay back $115 on payday. Done.
All of this talk about high APRs is only because current laws require payday loan companies to describe them as annual percentage rates rather than as "fees" which would be more accurate. Banks and credit card companies are not subject to this requirement.
Sure payday loan companies want your money, but anyone who thinks other for-profit companies are in business for anything other than making a buck are delusional. Payday loan providers are providing a service that people are willing to pay for. Some folks will abuse it, sure, but that's going to happen with anything. No business "really want(s) to help you".
There seems to be a lot of misplaced anger aimed at "those people" in these comments. You should be angry at whoever's responsible for your 401k losing 80% of it's value in the last year. I doubt they're hanging around the corner store buying smokes and beer.
PAYDAY LOANS STINK! The political climate is changing and their end is near. Their store fronts are becoming more and more dangerous places to work. Their disgruntled clients are getting smarter, banding together and learning how to fight back. Payday Loan companies offered some valuable service to the community, but for too long, we've been playing by the unfair rules written by these powerful companies. PAYDAYLOANSSTINK.COM welcomes them to exist, but its time that the playing field is leveled. Payday Loan companies have proliferated through intimidation and misinformation for too long. PAYDAYLOANSSTINK.COM exists to give you - the consumer & the employee - the information you need to gain the upperhand. To escape their devious cycle-of-debt trap! PAYDAYLOANSSTINK.COM invites every one affected – including employees of the industry – to join in the discussion and learn from each other.
- JUST STOP PAYING! Always remember to put a Stop Payment on your check. It forces them to stop charging interest and negotiate a payment on your terms. Not theirs!
- Did you know that by sending them a simple Cease And Desist letter by certified mail, you can get all of their harassing phone calls – to you, your work and your family - to stop?
- And did you know that many Payday Loan store fronts are blatantly breaking laws every day? That a simple letter to your City Council or your Attorney General could help to shut them down? Or even get some of your money refunded?
- THE “EPP” EXTENDED PAYMENT PLAN – Available at nearly 70% of the nation’s Payday Loan stores, but yet you are never told about the EPP - “Right now your Payday Loan store is offering a three-month, interest-free payment plan for anyone who has a current loan! Save hundreds of dollars in interest. That’s right! Whether it’s Advance America, Check Into Cash, Quik Cash, Check N Go or some other Payday Cash Advance company, just tell them you are tired of paying interest and would like your FREE EPP. The Extended Payment Plan. Ask for it today before it’s gone!”
PAYDAYLOANSTINK.COM thanks you for taking the time to read this quick comment. Our new site has much more detailed information available regarding the topics above. As well as – “Small Claims”, “BBB & FTC Complaints”, “Arbitration Agreements”, Community Forums & more!
My dream biz: a check cashing place that also sells lottery tickets, beer and cigs.