For those of you who value your freedom to make your own decisions in regard to your finances, and how you pay your bills, please read my Blog, "Pay day loan mis-information".
There are people, including reputable news writers, who do not fully understand pay day loans, who are spreading mis-information.
Lawmakers, and politicians, are buying into this mis-information.
Now they want to protect us from ourselves.
It is important that we all understand a balance of all of the facts, before decisions are made, that effect something of such good use to so many good people.
Read the Blog as follows:
Pay Day Loan Mis-Information
Category: News and Politics
I recently read a Reuters news article, written by Nick Carey, Mar 23rd, 8:15pm ET, titled, "’Pay day’ loans exacerbate housing crisis". I would like to clarify that there are some great inaccuracies and bias in this story that really must be pointed out.
I have had extensive experience with pay day loans, and, though I agree that the APR (annual percentage rate) is quite high, and people can get into trouble when they do not use these loans as they are designed to be used, this news report highly exhagerates the cost of a loan. Read from the article as follows;
"A pay day loan is typically for a few hundred dollars, with a term of two weeks, and an interest rate as high as 800 percent. The average borrower ends up paying back $793 for a $325 loan, according to the Center."
This is not accurate! And there was much more inaccuracy than this in the article.
A pay day loan from a legitimate financial retailer generally costs about $15 for every $100 up to $500. This means that for a loan of $100 for 15 days the charge will be $15, totalling the loan at $115, which must be quoted as an APR of 365%. the actual total pay off for a $300 loan is $345.
In reality it is only a fee that is being paid, not interest. However, government regulations require that it be quoted as interest, as an APR.
And, by the way, I don't know where the "anti" pay day loan "spin masters" get their math, but the 365% quote is an APR, which means that if you were to pay off and take this amount loan out, over and over again, consecutively over 1 year, your fee would equal that of a 365% APR. It does not compound, or whatever "voodoo" the "spinmasters" would like people to believe.
So it should be clear that pay day loans are strickly meant, and offered, to be used as short term loans, and never on a long term basis.
If a borrower runs into trouble and falls short of being able to pay off the loan, legitimate financial retailers offer, for no additional fee, payment plans with CFSA, and ,in some states, state sponsored plans.
It also should be noted that these loans, and their payments or lack of payments never reflect on the borrowers credit report or history.
The only way that a short-term loan, a pay day loan, could build up to the absorbitent amount qouted in the news story, is if the loan were to be "rolled over", which is highly illegal in nearly every state that regulates these loans, so, thus, it would be highly improbable that there would be an average of borrowers that pay such amounts.
Pay day loans are for exactly what they are named. A short term small loan to be paid off by the next pay date of the borrower.
These loans have saved many a borrower, in a temporary financial pinch, to pay some bill(s), from much harsher penalties and costs that are incurred by banks and credit institutions if checks do not clear or payments are late.
The proper use of a pay day loan actually shows a personal and professional level of responsibility when it is used properly.
Yes, people do mis-use these loans, people get into trouble, people borrow beyond their means, and there are less than savory lendors who do not do what is right in order to avoid such disasters for their borrowers.
Pay day lendors must exercise great responsibility to protect borrowers and potential borrowers from becoming victims of borrowing beyond their means. That might even mean turning down a less than able and questionably qualified customer from borrowing.
I am disturbed to also hear lawmakers and politicians who are buying into mis-information and threaten the reasonable management and existence of a very useful and helpful service to many people.
Bruce - Washington
