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Payday & Quick Cash Loans: Why They Are Bad for You
By Molly's Brother | February 13, 2008
When you’re unemployed, these cash call overnight loans look like the only option. When money is tough the quick loans and cash advance commercials are incredibly attractive. Images of smiling men and women of all races and ages describe to you in upbeat voices how great it was that a $10,000 loan is only a phone call away.
Here’s what’s not mentioned:
- These loans are targeted specifically at individuals with lower-incomes.
- The APR on these loans easily surpasses the interest rates on credit cards. (However, because of a poor credit rating, these people who end up at getting an easy loan at cash advance stores are denied credit cards.)
- The APR ranges from 35% to 59% to 96%–if everything works out.
- There are hidden fees that aren’t made clear. So often, you are paying much more money than you expect.
Knowing how damaging these lenders are, my curiosity kicked in and I decided to call a company today to see how “good’ these deals really are. Read on to see what I found out.
If I borrowed $2,600 to be paid over three and a half years, here’s what it would look like:
- Monthly payments: $216.55
- Annual interest rate: 96%
- Loan Period: 3.5 years (40 months)
- Total Interest: $6,493.82
- Total Repayment: $9,095.10
If I borrowed $5,075 to repay over ten years, here are the details:
- Monthly payments: $250.31
- Annual interest rate: 59%
- Loan Period: 10 years (120 months)
- Total Interest: $24,932.19
- Total Repayment: $30,000
These repayment plans were sent to me from an agent who works for the specific company I called. I am stunned, speechless, astonished, and dumbfounded. People who aren’t financially educated are being preyed on by those who are too financially astute. I know it’s not criminal, but it’s ridiculously immoral.
Topics: Debt |