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

submitted by theFriendlyDoomer from (research.stlouisfed.org)

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[–]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.