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PayDay Loans

A previous exploration of payday loans discussed the sky-high interest rates being assessed by these "reputable" loan vendors lurking on street corners. It actually is worse than stated.

A brochure from my local bank discusses The Truth About Payday Loans and provides this example:

  • Face value of check: $200
  • 15% fee: $30
  • Amount paid to customer: $170
  • Lender pockets $30, or an APR of 458% if the loan is repaid within two weeks
  • If one extends this loan for two more weeks, another $30 is charged, the loan is now $230, and the APR leaps to 917%
  • In short, it costs $60 to borrow $170 for one month
And all of this assumes that the loan is repaid at the end of one month. Oh well, no worry, as our government will bail everyone out!

Source: WECUnews, February 2008