TIL there are more payday loan stores in the US than there are Starbucks or McDonald’s.

submitted by theFriendlyDoomer from (research.stlouisfed.org)

sorted by:
top
newinsightfulfun
you are viewing a single comment's thread.

view the rest of the comments →

[–][deleted] 10 insightful - 1 fun10 insightful - 0 fun11 insightful - 1 fun -  (8 children)

all the new small businesses never last more than 2 years in my city, exccept payday loans, theyve been there forever

part of the corrupt banking system, they always take advantage of the weak and vulnerable and governments allow it because the banks control government

[–]magnora7 7 insightful - 1 fun7 insightful - 0 fun8 insightful - 1 fun -  (7 children)

Plus they charge like 24% interest on loans, which should be against usury laws, but somehow isn't

[–]Trajan 6 insightful - 1 fun6 insightful - 0 fun7 insightful - 1 fun -  (6 children)

What should the limit be? It'd have to acknowledge the shorter terms of payday loans that carry with them a higher default rate. It's not as if payday lending is an amazingly lucrative industry. Their margins are smaller than banks. I'd certainly say that better regulation of the practice of rolling-over loans could help. People borrowing modest amounts and paying it back within the agreed time will pay a higher rate of interest yet will not be in the silly situation of paying back many multiples of the original sum.

The solution is to understand and address issues that keep people out of conventional banking, and perhaps consider how well we educate people to handle money? Improve education, incentivise and encourage people to have children in stable long-term relationships, and the problems that feed into this situation lessen. Payday lenders are a symptom, not a cause.

[–]magnora7 4 insightful - 1 fun4 insightful - 0 fun5 insightful - 1 fun -  (5 children)

Actually I mispoke, the real rates are much higher:

APR ranges from 391% to more than 521% for payday loans.

According to google. I think the limit should be about 10% APR per year. Beyond that it just begins creating systemic financial risks that lead to things like the financial crisis of 2008. But I see your point about it being a symptom of a deeper problem.

[–]Trajan 4 insightful - 1 fun4 insightful - 0 fun5 insightful - 1 fun -  (4 children)

The problem with 10% APR is that for a loan duration measured in weeks this would be a tiny rate of interest. That’d be lower than credit cards, and they have far more stringent vetting processes by virtue of their business model. Payday lenders have far less vetting and a quicker decision. Those APR

I’d definitely support creating a cap where loans are rolled over to run for months as opposed to weeks. Maybe a cap tied to a multiple of the principal so that the total amount owed can’t exceed that? To me the system is broken where you can borrow $100 for a week and end up owing $1000.

[–]C3P0 4 insightful - 1 fun4 insightful - 0 fun5 insightful - 1 fun -  (1 child)

The problem with 10% APR is that for a loan duration measured in weeks this would be a tiny rate of interest.

10% Annual Percentage Rate is the same "rate" no matter if it is for a week, a month, or twelve years.

[–]Trajan 2 insightful - 1 fun2 insightful - 0 fun3 insightful - 1 fun -  (0 children)

Yeah, it would be, but still a low rate given this is unsecured debt incurred for perhaps a few weeks at a time. Add in the reduced compounding and payday lending isn’t very economical for lenders.

[–]philosopher 2 insightful - 1 fun2 insightful - 0 fun3 insightful - 1 fun -  (1 child)

Yep. By the time you're in a position where you have to borrow money at >100% APR, you've lost control of your finances. I think people shouldn't be allowed to borrow at that rate. Instead the person's debts should be frozen/cleared, and a financially competent person should be put in control of the financially wrecked person until they can sort out whatever issue led to them being in so much debt.

[–]Trajan 1 insightful - 1 fun1 insightful - 0 fun2 insightful - 1 fun -  (0 children)

There is something to be said for having the financial equivalent of sectioning somebody for mental health issues.