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Payday Loans Only Make Things Worse
By JLP | August 28, 2006
When I read articles like Desperate Consumers Pay For Their Plight by Ollie Reed, Jr., I am reminded that IGNORANCE IS NOT BLISS! I have a problem with predatory lending because for MOST PEOPLE it only makes their problems worse. I also have a problem with people using these “services.” I don’t care who you are: if you use a payday loan company or a car title company, you are asking for trouble. As the article states, for someone who is having problems makes ends meet, how are they going to come up with the extra money to pay back the loan? That’s the problem with loans of this sort.
The guy in the article got into trouble when he used a car-title company to borrow money so that he could pay his rent. He got stuck in a trap of not being able to pay off the loan so all of his payments were just going to pay interest. As you probably know, if all you can pay is interest, you’ll never pay off the loan. After paying on the loan a year, he was late with a payment and the car-title company came and took his car in the middle of the night. According to the article, he “learned his lesson” with car-title companies. Now he is only going to use payday loan companies:
“I pay $36 on a $200 payday loan,” he said. “It’s far easier to deal with than car-title loans, and I can pay my bills and feed my family. Payday loans have dug me out of some holes.”
That is one expensive loan! For each $200 he borrows, he is paying 18% interest ($36 ÷ $200 = .18 or 18%). If he can’t pay back the loan in time, he will have to take out another loan, which will make his interest rate even higher. Payday loan companies are evil.
Of course, the payday industry doesn’t see it that way:
Bob Barberousse, a lawyer who represents Select Management Resources, an Alpharetta, Ga., company that is one of the major owners of car-title stores across the country, said car-title and payday stores fill a vital niche.
“Most of these people can’t go down to the X National Bank and get a traditional loan,” he said. “Numerous people come in and say, ‘Without this, where would I get the money for an emergency?’ “
Sure pal! You say whatever you have to say in order to sleep at night.
One thing I found kind of strange about this article is the picture of the couple. I don’t mean to be nitpicky or judgemental but if this couple is really struggling, why are they buying cigarettes and spending money renting/buying movies? I’m guessing these folks don’t have a budget.
Topics: Budgeting |