I was reading this article. It had all the elements of a sensational story. The little old lady, during the holiday season and the $1700 balance on the $600 advanced.
She leaves a great sound bite: “When I got these papers in my hand and got to looking at them, I thought, I’m being stolen blind.”
The article left out some critical information. This is a simple interest loan and you can pay off at anytime without incurring a prepayment penalty. It this loan is paid in 14 days, for $600, this loan will accrue about $3 per day. So if they pay it off the next time they get paid, they’ll pay at most $50. If she borrowed $300, it would be more like $25. An NSF fee is more than that.
Notice her son paid the loan, but they don’t say how much was actually paid. The news only wants you to see $1700 on $600. It’s like saying your $300,000 home (at 7% interest) is going to cost you $718,000 over 30 years. It’s accurate, but does not tell the whole story. With this logic, they would make mortgages illegal.
I used this consumer loan calculator to play around for the numbers. I think the lender’s math is wrong. A $600/12-month loan would cost $1536.66 and carry a monthly payment of $129.14.
I’m glad that 81 year-old Mattie Anderson looked at the contract and understood the transaction. By law, that’s what’s important.
The payday loan industry needs to be upfront and honest. What the general public does not realize is that lenders turn away a lot of borrowers. This means that there is a market at work here.
The point is not to prove to the general public that they should take out a payday loan, rather to get them to accept the need for this type of a product and not condemn it.
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