Have you heard the Federal Trade Commission has issued a "Consumer Alert" with a big headline that says, Payday Loans = Costly Cash. Just as there are many ways to look at the situation, the same is true with payday or cash advance loans.
In simple terms, a payday loan is advance on your next paycheck. There are many companies throughout the country that offer these very short-term small loans. The term, or length of time you have to pay back the money typically runs from 2 to 4 weeks. The fees or costs of this short-term loan can be anywhere from 25 to 50%. And this is where the FTC comes in with their complaint.
The government agency spends a lot of time acting like they help consumers. The government has the authority to make changes in how these loans are offered if they were really interested in helping or protecting consumers. Instead however, they state that the APR or annual percentage rate of the small loans is in the hundreds of percent in the are right, but that's not the whole story.
Everyone knows that when you buy a product in a small package it costs more. Larger or bulk packaging usually costs less. Now consider how this fact as it relates to the payday loans.
Consider these facts:
1. A payday loan usually is anywhere from $200-$500 dollars. In the lending business, this is a very small loan amount. It's reasonable then, that the cost of this service would be more expensive than a larger loan.
2. A payday loan is as much a service as it is a loan. Although a bank or credit union may offer a lower interest-rate, how many of them would be willing or able to front you a couple hundred bucks to tell your next paycheck?
There's also no way a bank or credit union would be able to process your loan in just a couple of hours like a payday loan service does every day.
3. Consider payday loans in their costs against other purchases.
In simple terms, a payday loan is advance on your next paycheck. There are many companies throughout the country that offer these very short-term small loans. The term, or length of time you have to pay back the money typically runs from 2 to 4 weeks. The fees or costs of this short-term loan can be anywhere from 25 to 50%. And this is where the FTC comes in with their complaint.
The government agency spends a lot of time acting like they help consumers. The government has the authority to make changes in how these loans are offered if they were really interested in helping or protecting consumers. Instead however, they state that the APR or annual percentage rate of the small loans is in the hundreds of percent in the are right, but that's not the whole story.
Everyone knows that when you buy a product in a small package it costs more. Larger or bulk packaging usually costs less. Now consider how this fact as it relates to the payday loans.
Consider these facts:
1. A payday loan usually is anywhere from $200-$500 dollars. In the lending business, this is a very small loan amount. It's reasonable then, that the cost of this service would be more expensive than a larger loan.
2. A payday loan is as much a service as it is a loan. Although a bank or credit union may offer a lower interest-rate, how many of them would be willing or able to front you a couple hundred bucks to tell your next paycheck?
There's also no way a bank or credit union would be able to process your loan in just a couple of hours like a payday loan service does every day.
3. Consider payday loans in their costs against other purchases.
No comments:
Post a Comment