Well actually I have many, but here are the main two:
The small print at the end stipulates a 99.25% (?!?!?!) interest rate. It then goes on to say that on a typical $2600 loan you’ll make 42 payments of $216.55. That works out to about $9100. Isn’t that a fuck sight more than $2600 x 1.995? How is this math supposed to work?
How on Earth is this legal?
I guess it’s legal, but probably shouldn’t be:
APRs aren’t a one-time deal. First month, you get hit with a month’s worth of that 99.25% (call it 8%), added to your balance. Amusingly, that works out to maybe a buck or two less than that payment–so for that month, you’ve paid back one or two dollars of that wonderful $2600 loan. (That’s just a very lazy eyeball estimate. You just don’t want to look too closely into a hideous car crash of the math of a loan like that.)
The next month it happens all over again, and so on. It compounds. This is also why (just more a much more extreme version of) only making minimum payments on credit cards can rapidly fuck people over with poor budgetary control/circumstances, as it turns sisyphean–the boulder keeps rolling back almost the same distance it gets pushed up the hill.
It’s legal because if they made it illegal, Gary Coleman would personally break the knees of every legislator responsible for so doing.
100% interest. I wonder what loan shark rates are. Holy cow.
It’s 42 monthly payments at an annual interest rate of 99.25%
( 99.25% / 12 ) * 42 = 347% interest over the 42 months
$2600 * 347% = $9031 total that you pay them back
$9031 / 42 = ~$215/month.
I’m not sure where that extra dollar per month comes from (rounding? I don’t know), but there you go.
At least credit cards are regulated and capped at something like 30% APR.
I think payday loans should be regulated but the terms of service aren’t extremely horrible when you consider that most loans are typically only for 2-4 weeks and $500-$1000 in value.
So while the annual APR sucks, if you borrow $1000 you’re paying back about $1080 or so at the end of the month. For people with no credit, that doesn’t seem too bad.
Of course, like credit cards, the industry does thrive on people rolling over debt and as Drastic mentioned above, that’s when things go sour, really quickly.
FYI: If you paid the minimum on a $2600 charge on a credit card with an 18% APR, you’d end up paying just shy of $5,000 over 205 months.
If you want a sweet breakdown of all the other ways our government enriches the few at the expense of the many, check out this interview with Terry Gross on NPR’s Fresh Air: http://www.npr.org/templates/story/story.php?storyId=17808622
We used to have laws against this sort of insanity, but they’ve been surprise! repealed in the last 30 years!
Fuck you.
I’d like some more of what you’re offering. Please explain further.
Thanks for posting that interview, DM! I’m voting Democrat! Wooh!
skipping the wall of text in that wiki page
? .