Phillip J. Eby:

So, does that mean you’d be willing to loan me $100 for two weeks, if I gave you the generous sum of $1.38 for the privilege?
21 January 2008, 5:41 pm

Most likely not.

But here is what I have done through http://www.kiva.com

I have made loans to three people for a total of $300.00

Actually, the loans were for $100 each to people in Paraguay, Cambodia and Tajikistan.

These are all interest free loans for these people to run businesses to support their families.

I hope I get the money back because I will just loan it out again to somebody else. I get no interest.

So far, the amounts are being paid back in dribs and drabs.

So, pass the word on and maybe others will do good and make a few people in the world think “Wow, those americans are not so UGLY after all”.

lets look at a typical APR of 400% (see that .pdf file linked above)
400%APR yields a bi-weekly interest rate of roughly 5.5%

if i borrow 100$ and can manage a 10$ payment every 2 weeks (20$/month)…
i pay back 148$ in 30 weeks
if i can manage a 20$ payment…
i pay back 120$ in 12 weeks.

but let’s be realistic, the average loan amount is probably more like 300$ y’know, enough to cover utilities and cell phone, plus a few late charges…
to repay that loan, i need to pay back 20$ every two weeks for 66 weeks (roughly 15 months) for a grand total of $646.45. (it works out to a $43.00 average monthly payment for those 15 months)

(and who knows what the penalty is for missing a payment…)

for the sake of argument, let’s assume that my need for a short-term loan originated with a 50$ monthly deficit in my household finances. assuming i haven’t gotten a promotion, i’ve almost doubled my monthly deficit by trying to play catch-up this way.

the correct thing to say about this is that the average hypothetical jackass should avoid getting a fancy cell phone. but, if wages just didn’t add up for a hypothetical working-poor type person to purchase the necessities of modern living (like gas at $3.50/gallon) without credit, they would be f*&’ed.

and then double-f&*(’ed with interest.

besides, what do you expect the military to do? if you’re not willing to take on the “opportunity cost” of volunteering, and if we can’t deploy someone who’s in “severe” debt, who’s gonna fight?

And to think I balked at 21% one time, from “legitimate” Crapital One.

The saddest and most comical part of this whole story is the boo-hoo line that this extremely profitable business is singing. Thirty-six percent APR is crazy to most people, but to the predatory lending community it’s about an order of magnitude off. You think $1.38 is low, but does 13.80 to borrow $100 for two weeks sound reasonable? That’s more in line with what these guys want to charge.

Here’s a link to a .pdf showing the kinds of rates these guys want to charge

Being legal to do and being the right thing to do aren’t the same thing.

I just noticed a posting on one of my favorite blogs that discusses payday loans.  The Consumerist links a blog called the Leftwing Conspiracy that criticizes the payday loan industry for distributing a flier about a mandatory reduction in interest ra…