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16 April 2008
Is 36 Percent the Magic Number?
In looking around at Payday Loan legislation news, it would appear a 36 Percent rate cap is the target number
opponents have determined as their number.
The problem is these people are thinking in banking terms. A regular old bank would be tickled pink getting
36 percent APR on borrowed money. The thing they do not understand is this.
A Payday Loan is not like a regular loan. People will most likely resort to a payday loan because they cannot
secure finances anywhere else. Why can't money be obtained from a bank? Bad Credit is your answer.
How do you get bad credit? You do not pay back borrowed money in a timely manner. Lots of late payments, collections,
and charge offs will kill your credit.
This only makes sense. If people have displayed tendencies of a poor payment history, chances are the future will
be the same. Higher labor costs are a direct result of this. This drives up the costs of the overall Payday Loan
business.
The higher cost of business is always paid by the consumer. As I have stated in previous blogs, the Payday Loan
Industry does need some sort of rate cap, but 36 Percent will only put them out of business.
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