Facing the Truth About Loans

Tags Opportunity to ThriveHousing

They can go as high as 1,000%. It depends. There are two types of loans you can get from a payday loan place. You can get a payday loan or you can get an installment. Now if you get a payday loan, it has a set fee. For example, if you get $100, a payday loan has a set fee of $18. So you owe $118 the next payday. If you need $100, then $18 is not a lot to pay if you’re in a tight spot. For instance, today my girlfriend had to do some outpatient surgery. I went with her to the hospital, we get back home, and she’s kind of groggy from the anesthesia. I had to pay somebody to bring her back home and get her prescription for her and get her some Chinese food because I don’t want to cook and she’s not going to cook. So I came here for $100 because I didn’t have any money. It’s worth it to me. I’ll pay $18 to make my old lady happy. I’d do it again, but I doubt if I’d ever go over $100. Now if you get it from a bank, you might be paying $2 or $3. Installment loans on the other hand are a whole different monster. With installment loans, the interest rate accrues daily. If you borrow $500 with an installment loan from a payday loan place, the loan is 18 months. If you take it the whole 18 months, you pay back $3,000 — six times the amount. That’s because the interest accrues daily. So the best thing to do, and most people are not aware of it — well, they do put it in the fine print — is the sooner you pay it off, the less it is. When you miss a payment, then that stretches it out.

That’s why you hear stories of people who borrow $1,000 and end up paying over $19,000 for it, because every month you miss, that’s 30 days of accrued interest. It’s best to get your lights cut off and get the money and turn them back on rather than get an installment loan. It will kill you.

There are a lot of people who don’t get out from under because of the fact that the interest runs over daily. And if you’re poor to begin with, you can get stuck in those things and never, never get out of it.

Just because it’s their business does not mean it makes sense. If you were to go to a bank and borrow $500 for a year and a half, you wouldn’t even pay $600 back. So to pay six times the amount of the loan, that’s just gouging. And they do it because the people who are their clientele have no recourse. Ninety percent of those who utilize payday loans do not have a regular bank account. Their credit is not good enough for them to go to a credit union or somewhere else to get the money. So when you’re desperate, you will grab onto whatever log that floats by to keep from drowning. And even though you know that it’s crazy and way too much, you need that money right now so you have no choice. And they know you have no choice. To put a cap on it will stop the industry from taking advantage of the people who can least afford it. Because the people who can least afford 1,000% interest are the people who frequent the payday loan places. They’re just getting further in the hole. You borrow $500 to pay a bill and you made a $3,000 bill to pay off a $250 bill. It needs a cap. It’s really important that somebody looks out for people who have no other recourse.

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Cedric Jones, photos by Lindy Drew