What is Digg?137 Comments
- edstate, on 06/06/2009, -11/+32Credit is a hell of a beast. Dangerous, sure. But for people who understand the concept (and it's not hard, really people) it's a very powerful and HELPFUL tool. I hope we choose to educate people rather than find some way for the Government to *outlaw* it.
- DannyLauren, on 06/06/2009, -3/+23"Quick money (at interest rates of around 500% or more), for people with bad credit has been praised by some as a lifeline for the poor..."
500% APR is a lifeline for about 10 weeks, after which you owe twice what you borrowed... - Ymeg, on 06/07/2009, -2/+21but what if I'm irresponsible and I can't manage my money? Should I whine to the government and hope they infringe upon our contract?
- rahsut, on 06/06/2009, -7/+22If these loans are outlawed, it might help struggling families but most probably wont. These people are getting payday loans because their credit is bad enough that they cant get any other type of loan. The reason the payday loans cost so much interest is because there is such a high rate of default and the profits from some loans cover the losses from others. If the interest rate is restricted then the payday loan companies will go out of business and these people wont be able to get any type of loan at all.
- edstate, on 06/07/2009, -2/+16Why not? That seems to be the fashion these days.
- chief302, on 06/06/2009, -3/+15I wonder if the new credit card legislation will have the unintended consequence of increasing the use of payday loans. All of a sudden, 30% interest doesn't sound so bad...
- GaltShrugged, on 06/07/2009, -4/+16Interesting.
Would you let people come in off the street, hire employees to deal with them, run background checks, give them $500 just so they can pay back $512.50 a month later? That's what they make on 30% APR.
Seriously. Are you suggesting that 30% is "usury"? I think it's criminal that a business is forced to give loans at under 30% when that's a joke. Giving someone $500 and they come back and pay $600 is not a bad thing. But it does make a large APR. - GaltShrugged, on 06/07/2009, -3/+14It's called a pay day loan for a reason.
- Ymeg, on 06/07/2009, -3/+14you're not suppose to wait 10 weeks to pay it back.
- inactive, on 06/07/2009, -3/+13If people are Idiotic enough to go for this, is it the government's job to step in and stop it?
- GaltShrugged, on 06/07/2009, -15/+24I'm sick of this 700% APR *****. These big numbers are used just to make it sounds worse than it actually is.
If you get a loan at $500 and pay it back two weeks later for $600. Yeah, it's just a hundred bucks for instant cash. It's 500% (without the compounding for APR).
No ***** pay day loan is going to give $500 at 18% interest APR. You know why? Because that would yield them $7.50 for a month loan and that isn't even worth any businesses time.
So shut the ***** up. Don't get the loan if you can't handle it and did I mention go ***** yourself? - darkened, on 06/06/2009, -11/+20The point of these loans is for them to be paid back... NEXT PAY DAY. IE, your car breaks down between pay checks and you have too poor of credit to have a credit card to be able to pay to have it fixed so you get a pay day loan get your car and keep your job. Next week or 2 you pay back the loan and lose mostly the $45 or so service charge and pay almost no interest.
Now if you're extremely financially irresponsible (or stupid whichever) and realize wait, I can't pay back last pay check's loan; I need a new loan! They will gladly roll the existing balance into a new pay day loan, along with a new $45 service charge and so on that your $100-300 loan can balloon into $1,000s in the matter of months. There's eventually a point where it becomes not worth the company to keep doing this as clearly the person will not be able to pay it and can sell it off to a collection agency, or work out a payment plan / partial forgiveness with the original debtor. This is how the free market should work, you can only take so much from the consumer where it bites you in the ass and leaves you with the bag. - GawtMilk, on 06/07/2009, -1/+10This is such *****. Loans are usually measured in APR (Annual or "yearly" Percentage Rate) because the loans are expected to last a year or longer. 10% APR means that in one year, you will owe 10% more than you borrowed. You got a $1000 loan, you owe $1100.
These payday loans are only meant to last a week or two weeks, until your next pay day. If you need fast emergency money - for example, you need money to repair your car so you can get to work, you take out a $100 pay day loan, and pay $125 back the next week. This is 25% interest over the course of one week, or 25% x 52 (weeks in a year) = 1300% APR. See why it is *****? Sure, if you let that loan last for a whole year, you'd be out a ridiculous amount of money. Let that loan last until your next paycheck and you are out of a manageable amount of money which paid for itself anyway. Without the $100, you wouldn't have received your payday, so a $25 fee isn't that much.
If these companies were charging 20% APR, that would be (20% / 52 weeks) around 0.4% interest per week. If someone takes out a $100 loan, they'd make fourty cents profit - the person who took out a loan would only give back $100.40.
You can see how running a business on that model is not possible. The number of people who default (cannot pay) these payday loans is also relatively high. If you have a number of people defaulting on loans, you cannot afford to issue new loans and you get frozen credit. Charging 20% WPR (not APR, which is annual, but Weekly Percentage Rate) means that if one person defaults, you won't go under because you have enough money coming in from other loans to cover it.
If you only issue $100 loans at 20% APR and make $0.40 per loan, and ONE person cannot pay back the $100 (defaults the loan), you would need 250 people to pay back their loans (give you back $100.40) JUST to cover that single person who couldn't pay it back. Do you think it is likely that only one in 250 people default? Of course not. It's probably closer to one in ten (just a guess). As a business they need to charge higher rates to prevent going under.
Granting 20% APR loans to everyone is part of what made the financial crisis happen. Everyone could afford credit, so everyone took out loans. Most of these loans were mortgages (loans to buy a house). Because of the indiscriminate (and often predatory) loans going out, banks quickly realized that many people couldn't pay them back and had to default. The APR was low enough that the people paying back their mortgages couldn't cover the people who were defaulting, and the companies went bankrupt. - lead2thehead, on 06/07/2009, -0/+8Outlawing them won't help. People who go to those places do so because they suck at making financial decisions. If you outlaw them, they will inevitably find some other way to bankrupt themselves.
- edstate, on 06/07/2009, -0/+8Economics is pretty unpopular these days. Haven't you noticed?
- GaltShrugged, on 06/07/2009, -3/+10Your examples are piss poor. Using APR is incorrect manipulation of the facts. APR = Annual Percentage Rate. These loans are only supposed to be a few weeks, so why not give the interest over the term of the loan? Wouldn't that be a more accurate way of doing it. Instead of putting 700%, they put 20%.
But accuracy doesn't work when you're presenting propaganda.
"Corporations are all inherently sociopathic."
Really? Do you have any proof to back that up or is it just a subjective statement? Last time I checked a business is trying to make as much profit as it can... at least that's what I'm trying to do with my business. Giving out loans that people default on isn't profitable the last time I checked. Since the industry is booming, they're obviously satisfying their customers.
It's one of those things that people tell us is evil in the media(like Walmart), but people keep shopping there. Don't you find that odd? Do you think you're maybe out of touch?
I keep hearing the term predatory. What are they doing that is predatory? They give loans to people that want them and loans they expect to profit from.
"It is plain and simple unethically taking advantage of those who can least afford it,"
Let me guess, the term predatory is used to negate the fact that pricks actually walk in and ask for these loans. Obviously these pay day loans places are profiting, so they have to be giving loans to the vast majority that are paying them back or they'd be broke. Right? The fact that they're getting paid back shows that people can pay them back.
Like seriously, these people are going to be retards with their money anyway no matter what you do. The problem is stupid people (as usual), but the blame is always set on other people. Until people realize that they're responsible, they'll have no reason to fix it.
This is common sense 101. But I don't expect much (if you reply) because all you use is terms like "predatory" (please define and prove), "sociopathic", "evil", "poor" as a way to hide the real problem and shift blame. - Eddylee, on 06/06/2009, -3/+10Why did someone digg you down? What you're saying is basically economics 102.
- AlienMushroom, on 06/06/2009, -0/+7Lisa McGreevy? More like Lisa McGreedy.
- GaltShrugged, on 06/07/2009, -1/+8Wow, you mean just like a loan? I thought pay day loans meant it was free.
- Ymeg, on 06/07/2009, -5/+12There is no such thing as usury. If you willingly agree to a deal and are under no coercion, there no such concept as excessive interest rates. Your deal, your responsibility. Don't like the 700%--don't take it.
- ASfinkterSezWut, on 06/07/2009, -0/+7Their buddies at Goldman Sachs.
- simcjt, on 06/06/2009, -4/+11Damn who taught the friendly neighborhood mobster to use the internet
- thetrev, on 06/07/2009, -0/+6considering i work as a debt collector for one of these companies, i agree that it's a ripoff: although it's slightly miseleading. 1000%+ APR is worked out annually, but these companies require you to pay it off the same month. get £80, pay back £100. still, lending money without checking credit file? asking for trouble.
- rahsut, on 06/07/2009, -0/+6unfortunatley some people think it is
i think we should provide education but thats it - LouisCipher777, on 06/07/2009, -1/+7atheist, I've said this like 6 times already.....
AT WHAT POINT DOES PERSONAL RESPONSIBILITY ENTER INTO THE EQUATION? - edstate, on 06/07/2009, -4/+10That's freedom for you. And besides... even this *kind* of credit benefits some people. Are YOU going to be the one to judge, and dole out certain services to certain people based on what you call "their ability"?
Sounds like Central Planning to me. - rahsut, on 06/07/2009, -0/+5in basic economics i was taught that price floors and ceilings create an inefficient market and therefore a dead weight loss. lets just allow the market to decide what a fair rate is (allows the payday loan company to make enough money to cover losses on delinquent loans and make a profit). if you think that the companies are price gouging and their service could be provided cheaper, then why don't you provide it cheaper, i guarantee that you will got a lot of business if you are willing. maybe these companies are charging these rates for a reason and we should allow the principles of supply and demand sort it out rather than regulate everything under the sun.
- Loonatickle, on 06/07/2009, -3/+8People in economic hardship are often the ones who need payday loans most. If you don't have enough money to feed your family, would you rather get an advance on your paycheck (even at a high interest rate) or have nothing? Don't project your skewed perspective onto others.
- LouisCipher777, on 06/07/2009, -2/+7what part of "voluntary service" do you guys not understand? People make their choices and they get the benefit or the problem that they deserve.
A couple years ago I used payday loans a few times in one year and never had a problem with it. Unexpected costs happen like car repairs and medical bills. be responsible and you won't have a problem. - LouisCipher777, on 06/07/2009, -1/+6it worked for GM and Chrysler
- MatthewDuke, on 06/07/2009, -4/+9All these people are free to NOT use the service. Any participants are willing participants. Nothing to see here.
- rahsut, on 06/07/2009, -0/+5the government goes after internet gambling because it wants tax money not because its bad
the government goes after child porn because that can hurt children who need to be protected
payday loans are only given to consenting adults and are not forced upon them, the government should not interfere - GaltShrugged, on 06/07/2009, -6/+11How do they prey on people?
Do they hunt them down like a cheetah? I love the diction in this thread. It would be excellent for a school teaching the definition of hyperbole.
I have never used a pay day loan service. I never had the need to do it. I can think for myself, so the marketing isn't brainwashing "prey" attacks on my mind. Plus I like keeping more of my money in my pocket. But let's say I was squeezed for cash waiting for a check to come in the mail. I'd sure as hell want to have pay day loans available as an option, just in case.
Just because people are ***** retards with their money, doesn't mean you can kill off a good industry. And yes, it is a good industry. - ridusoftyranny, on 06/07/2009, -1/+6If a person makes a stupid decision it's not a failing of the American system, it's bad judgement or lack of personal responsibilty. I'm not sure why the government thinks they have the power to legally dictate how much a PRIVATE industry should profit from it's business activities. Seems pretty unconstitutional to me.
- fury420, on 06/07/2009, -0/+4the bilderberg group is behind payday loan scams? seriously? lawl
- RungeKutta, on 06/07/2009, -4/+8Jesus Christ! Angry much?
- ridusoftyranny, on 06/07/2009, -0/+4Anyone who grew up in the US was offered a free education. Math and English are part of the core studies. We, as a society, offered people the tools to make informed life decisions. What others do with those tools is a matter of personal choice. Do you have any idea how many resources are available to people in financial trouble? There's no excuse anymore.
- LouisCipher777, on 06/07/2009, -0/+4who are you to make gross generalizations about what types of people use these loans. there are eligibility requirements like proof of income. they are up front about what they are doing and what the final costs will be. how is that a bad thing?
I will say it again... at what point does personal responsibility enter into the equation? - rahsut, on 06/07/2009, -0/+4i think he forgot the "/s". the day they outlaw idiots we wont have a congress anymore
- GaltShrugged, on 06/07/2009, -1/+5Collateral is "predatory"?
Why don't we call these poor people "predatory"? They attack the pay day loan industry getting loans they won't pay back, forcing a good business to require collateral on loans. The poor are predatory. - azbmr, on 06/07/2009, -3/+7I know it is cynical, but I don't think the lack of payday loans will "force" anyone to put anything away. Education is the only thing that might do that.
- AtheistPride13, on 06/07/2009, -3/+7if banks and wallstreet can do it why can't I?
- Ymeg, on 06/07/2009, -0/+4AtheistPride13, there is a clause in the contract that states they can change interest rates for any reason.
- wh3873, on 06/07/2009, -1/+5The difference is you can't use lead based toys or toxic food safely (the seat belt one I don't care about). These loans can save a poor guys ass and without them some people could end up in a bad way. A better analogy is knifes are dangerous but without them it's hard butcher a cow.
- MatthewDuke, on 06/07/2009, -2/+6Thank you...finally, somebody with a brain. A "profit" of $7.50 won't even pay for one hour of wages for a worker at these places. I'm sure filling out the paperwork and dealing with the client from start to finish costs more than $7.50 (and we haven't even started talking about expenses like electricity, rent, etc., etc.).
That's how you think if you've ever owned and/or run a business. Most diggers have not. - norman619, on 06/07/2009, -2/+6Loonatickle:
LOL!!! Something tells me you have never been in that position. I know a few how have been and currently are in that position. The payday loan does not help. All it does is postpone the inevitable abd bleeds them. In the real world bills will pile up when you do not pay them. If you can't afford to feed your family you are most likely unable to pay other essential bills as well. They will not be able to pay back the payday loan as well but for a short while these companies can bleed them.
Be happy you aren't in such a bad position that you feel they are your only option as well. - norman619, on 06/07/2009, -6/+10How about not give it to people who are already in economic harship? That's what these payday loan companies are doing. It's sickening. The only people to go to these places are people who are already in a financial bind.
- chief302, on 06/07/2009, -0/+4You know what they say about paving a road with good intentions...
- rahsut, on 06/07/2009, -0/+4if someone is willing to loan these people money for a certain rate and these people are willing to pay this rate then who are we to stop this happening? education is a great idea but everyone should still have the choice to what they want in this case, if education stops people from wasting money that would be great but it is not our right to force them.
- BurgGuy, on 06/07/2009, -0/+3This type of upfront fee is how the APR can rise to levels that would embarrass the mafia. For instance, take that $1000 loan with a 15% transaction fee and a 28% Per year interest rate. The borrower pays it all back in a month. $150 fee + $23.33 interest gives a gross return 173%, in a month, or 2080% per year. Not too bad.
On the other hand that lender must be ready to absorb the bad debts and costs of collection, which will be great, given the risks of this market.
This business, like all markets, will self correct, without Chris Dodd and Barney Frank's help. -
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