We have all seen the local businesses or advertisements that offer payday loans...to those desperate souls who need a few bucks to tide them over until they receive their next pay check. It happens...and the process is simple enough...
In Washington State, more than $1 billion in payday loans were made in 2005, which came with an "average" annualized interest rate of 391%. That's right, 391%!
Question 1: How much do these payday loan places "clear" each year?
Question 2: Suppose your car breaks down, your finances are stretched thin, and you take out a loan of $1000 to make your house payment. But, you can never get caught up....How much do you owe in 1 year? 5 years? 10 years? 25 years?
Source: The Stranger, November 16, 2006, p. 13