Hayley Peterson’s fantastic headline – 6 outrageous facts that show how payday lenders screw consumers – is fantastic not so much because it promises to show us how payday lenders do their dirty work, but because it accurately presumes that payday lenders “screw” consumers.
Here are Peterson’s 6 facts:
1. 12 million Americans borrow $50 billion every year with payday loans
2. Interest rates are 35x higher than credit cards, 80x higher than mortgages
3. On average, folks pay $800 for a $300 payday loan, or more than double the original amount of the loan, which shows us how high the interest really is
4. Minnesota’s rates are the “best”: 196% — Mississippi’s and Wisconsin’s are the worst: 574%
5. Borrowers who take out 6 or more payday loans every year make up half of all loans in California
6. There are more payday loan outfits where there is more poverty
It’s not a huge leap to see how the cycle of debt/low income works. If you need money to make ends meet, even if it’s just a few hundred dollars, you may have nowhere else to turn but a payday lender, and the payday lender will get you with the highest interest rates you can find anywhere. This, in turn, ensures that you’ll be paying out more than double on your loan.
Eventually, it may be difficult to pay off the loan itself, given the rates, and it all piles up. Many, many people find themselves in this situation, and end up considering bankruptcy to get out from under overwhelming debt – and bankruptcy is one way to escape the cycle.
The 6 Problems In Payday Loans