To make ends meet, many are turning to quick, online payday loans, but in some instances, the payback terms are shocking.
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He didn't think to ask what the interest rate was or even what the payoff amount would be in that one hundred day period?
He learned a lesson the hard way - never assume anything when it comes to borrowing money, I don't care if it's from a friend, family member or legal loan shark.
What I don't understand is that with mortgage interest rates going up why banks still essentially pay nothing on savings accounts.
ReplyDeleteAfter we sold our house last year, I have put smaller amounts of money into shorter term Certificates of Deposit, 1 year max. They are offering up to 5% at times while my savings account is 0.05%. Great way to keep it semi-liquid but also pretty safe. I don't consider stock/bond investments safe at all at the moment.
DeleteHenry Lee, I'm reporting you to the thought committee. You can't be allowed to ask questions like that. It goes against everything that we hold to be American...
DeleteBecause savings accounts don't generate enough profit for the banks to want to deal with, nor do they bring in enough cash assets to worry about.
DeleteWhen I was growing up as a kid, you could get 4% on a $100.00 balance in your savings account. Put $100K in and you'd get $4K a year or more in interest. I knew one guy in Junior High who had a yearly income of around $6k just from interest, plus what he made off the stock market.
Can't do that anymore.
He had to borrow at 186% interest to have his car repaired? Glenn Beck, rolled his eyes, snickered and said he should have had Car Shield.
ReplyDeleteYears ago I attended a conference in Reno, NV. Across the street were a few payday loan places. One was open one night while I walked to a restaurant so I stopped in to see how they operate. Nice folks, but they charged in excess of 300% interest for most loans! I was floored but they explained that the casino across the street was a gold mine for them and they have a high rate of defaults. I guess when you’re desperate to lose more money in penny machines you’ll do just about anything. Sad.
ReplyDeleteI always left my ex on the casino floor while I hit the pawn shops there on Virginia in Reno. You won't get a bargain there, but they have some of the best stuff there - watches, rings, anything that can be pawned for another round at the tables.
DeleteOf course it's legal - and it should be. You should be able to charge whatever interest rate you want. It's up to the two parties to come up with an agreed contract. Don't bitch because you were too stupid to know better.
ReplyDeleteSome people are high risk borrowers, and the rate of default for them is high. A lot of the high interest is there to make up for the high rate of default. In those cases, the alternatives are: high interest, or no loan at all because the rate of default is so high that lenders can't make a profit at that price point.
ReplyDeleteI tried putting money into peer to peer lending once. I put $500 in there, and made loans to several people. Rates were 10-16% APR for 36 months, and the borrowers I selected were in the 680-700 FICO score range. Initially, they paid on time and I was making some cash. Within 18 months, every single one of them had defaulted on the loan. I lost most of my $500 and learned a valuable lesson.
Some people aren't responsible enough to borrow money. If they want to borrow anyhow, interest rates need to be high enough to make up for their lack of responsibility.
Try getting a loan for a few hundred dollars for a few weeks from a bank. If they would do it - and they won't - they'd charge application and processing fees of several hundred dollars, same as on big long-term loans. For a small loan, that's over 100% added to the loan on the first day. But because legislators like banks, they get to pretend it isn't "interest".
ReplyDeletePayday loan places have a more efficient process so it costs less to offer a small loan, but they still have to pay wages for someone to process paperwork and the default rate is high. So it seems costly - but there's a reason people willingly pay it. Not being able to fix your car and get to work is a lot more costly, and so are bounced checks.
Now, I never needed to do that. I could charge unexpected expenses to a credit card and only pay 18% APR (1.5%/month) until I could pay it off. But that's because I was not poor...
Why are you always 3-4 days behind on posts?
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