These loans are evil. There is no other word for them. If you are in Texas, let your representation know that you think this is a bad idea; an evil idea.Texas legislators are about to consider HB 846, a bill being pushed by payday lenders. The bill would legalize interest rates of more than 700 percent in Texas by authorizing payday loans under Texas law.
Payday loans are short-term, high-interest loans that are supposed to tide you over between paydays. But the interest rates on these loans exceed 700 percent, and often trap borrowers in a cycle of debt. On average, payday loan borrowers make between 8 and 13 of these
loans each year. Frequently borrowers can only afford to make the interest payment and make no progress paying off the original debt.
If you are not a Texan, see what your state's laws are and try to put a stop to it. Those readers I have in Wisconsin, congratulations to you for having a governor that stands up for the poor there.
The Federal Trade Commission has some hints to avoid using these services.
Here's a report on a study (I couldn't find much in the way of statistics on the web, which concerns me) from 2002 that describes the situation pretty well (as far as I understand it).
The facts are that users of the loans look at the fee for the loan, not the interest. And the loan companies know that their target consumer will likely have to roll over the loan a time or two. The APR then kills the borrower. And as far as profits go. The research I did shows a profit of around 35%.
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