Payday Loans - Loan Sharks or Life Saver?

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from JoeUser Forums

A few years ago, I noticed all these shops popping up.  They were advertising short term loans for the cash strapped.  Up to $500!  For that short term loan to tide you over to payday.  I did not think much of them, nor did I ever try to avail myself of them.  I knew the catch without going in to check on it.  They would charge a fee for a loan of a week or so.  And annualized, that fee was worse than a cash advance on a credit card.  How else could they do business?

But I figured that perhaps there were some fish out there that would swallow the spiel and take advantage of them.  But since they were up front about the charges, I saw no problem.  You make your own decisions.

The annualized interest rates turned out to be about 360+% or some such ungodly number.  Ok, So?  It is short term, and not mandatory.

But then our over protective legislature decided that "This MUST stop!".  Because the rates were akin to loan sharking.  Even though they opened the door for the loans to be legal.  Until they went back to remedial math and figured out the annualized percentage rate.

I am sure there are many states that do not allow these type of loans.  Pappa government must protect their little chicks.  But I am curious.  Does anyone think they are a bad idea?  This is not a long term loan, but they company needs to make some money or they cannot stay in business (remember the joke about the Rolls Royce owner getting a $5k loan and using his car for collateral in ManHattan - and then paying it off in 30 days and the interest all $15 of it? Parking in Manhattan for 30 days for $15 dollars!).

Personally, while I have never done a cash advance on a credit card (due to the up front 2% fee plus macaroni and cheese is not a bad dinner), I would have had I ever been in those straights.  But for others (as my wife is a paralegal in bankruptcy), I do understand that some just cant manage money to save a penny.  So why not let them avail themselves of this service.

Or not.  I guess I cant see why Papa Government would even care.  And by deciding it is bad, they are basically going to shaft the poor (when was the last time a middle or upper income person needed a short term $500 loan?).  The poor cannot go to a bank for a loan.  So they have 2 choices.  Payday, or Guido.

If I was there, I would chose Payday.

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Reply #1 from JoeUser Forums Top
They are a bad idea. But the solution is not in legislation, but in advocates for the poor putting their money where their mouth is. If you want to get rid of the payday loan places, start opening loan places that put them out of business with attractive rates for the poor.
Reply #2 from JoeUser Forums Top

If you want to get rid of the payday loan places, start opening loan places that put them out of business with attractive rates for the poor.

Interesting proposal coming from a libertarian.  Seriously, the only way they can be put out of business is with government subsidies.  Think about it.  The only way these short term places can pay salaries and rent is to charge a "fee" and since the loan is so short, it has to cover those costs.  Not many people would work for pennies a day.  But for a reasonable rate, that is what they would have to.

I personally dont like them.  And I dont understand the mentality that does.  But as long as everything is up front, that is their decision.  I am not their parent.

Ashes of the Singularity II
Reply #3 from JoeUser Forums Top
Seriously, the only way they can be put out of business is with government subsidies.


No, that's not true, Dr. Guy. Why can't NONPROFITS like the Rainbow Coalition, etc, put money they've already extorted from businesses into the community in ways that help the poor instead of lining their own pockets?

Government subsidies aren't needed for a multimillionaire to put up their own cash to provide services to these communities. The interest rates, by the way, actually sometimes top 1000% APR...now, granted, some of these people take them to rent to own big screen TV's, or buy cigarettes and such, but some individuals actually use them for car repairs because they have no choice.
Reply #4 from JoeUser Forums Top
Also, now that writing a bad check is a felony in many states, payday loan places have effectively brought back the debtor's prison.
Reply #5 from JoeUser Forums Top
payday loan places have effectively brought back the debtor's prison.


This is a vicious cycle I see at the bank. People, rather than living from paycheck to paycheck, live from payday advance to payday advance. They lose so much more on interest than they'd care to realize.

I feel really bad for them; I wish there was something I could do, but there's nothing from my end of things that I could possibly do to fix things.

But, it is a cycle, and once you're in it, it seems inescapable.
Reply #6 from JoeUser Forums Top
I used one of these places once several years ago. My car was dead and I needed the money to buy parts to fix it. I didn't have enough cash so I did one of the payday loans. While the rate was absurdly high, it did allow me to repair my car so I could get back and forth to work.

The way I see it, if people are willing to pay these rates and feel like they need the money, what's wrong with it? Nobody is forcing them to use the service.
Reply #7 from JoeUser Forums Top

No, that's not true, Dr. Guy. Why can't NONPROFITS like the Rainbow Coalition, etc, put money they've already extorted from businesses into the community in ways that help the poor instead of lining their own pockets?

I stand corrected!  I dont know the answer, but thank you for reinforcing my faith in you!

Reply #8 from JoeUser Forums Top

Also, now that writing a bad check is a felony in many states, payday loan places have effectively brought back the debtor's prison.

Not here (a felony).  But I can see the rock and hardplace in states that are.

Reply #9 from JoeUser Forums Top
The way I see it, if people are willing to pay these rates and feel like they need the money, what's wrong with it? Nobody is forcing them to use the service.


As far as the business is concerned, from a legal perspective, I agree. From a moral perspective, now there we get into a debate.

I also agree the government should not legislate these places. Because, as bad as they are, as you and I have discovered, sometimes, there are no alternatives. After you've hocked everything of value, you have to do something.

The people preaching against these places, though, are part of the problem, not part of the solution. They're doing nothing to help the poor and needy, they're just pointing at businesses that, for better of for worse, provide services that do potentially help the poor. As I said before, the solution would be for them to put their resources towards providing other solutions.

If people can start loan coops in third world countries without subsidies, why the heck can't it be done here?
Reply #10 from JoeUser Forums Top

But, it is a cycle, and once you're in it, it seems inescapable.

Good perspective.  And true.  But the cycle is in the need to have everything.  When I was in college, I worked a 40 hour week (Jr and Sr. Year), and went to school 18 credits a semester.  My car died.  And I thumbed.  To work and school.  And I did not have a TV.

Today, everyone (IMHO) thiniks they have to have it all, with no consequenses.  Perhaps this is their slap in the face.  So that they realize, you deal with what you have, not what you want.

Reply #11 from JoeUser Forums Top

The way I see it, if people are willing to pay these rates and feel like they need the money, what's wrong with it? Nobody is forcing them to use the service.

Those are the people they are using in their ads (both promoting it and to lobby your legislators to keep their mitts out of it.  Once or twice seems to some to be ok.  Living like that is an addiction as bad as a drug habit.

I support them for people in your past situation.  But I know it will be abused (or the users will be) by others.  Still, it is their choice.

Reply #12 from JoeUser Forums Top

As far as the business is concerned, from a legal perspective, I agree. From a moral perspective, now there we get into a debate.

I also agree the government should not legislate these places.................

Now that is the Gideon we know!  And I totally agree! (quoted part abreviated).

No argument from me!

Reply #13 from JoeUser Forums Top
Today, everyone (IMHO) thinks they have to have it all, with no consequences.


I've thought a lot about this lately, especially since I see it a lot more often now in college than I noticed it before. In my local conservative rag, the Deseret Morning News, they had an op-ed piece about it. Here are some excerpts to make you think a bit:

"In 1966, 42 percent the freshman class at UCLA said they thought it was essential or very important to be 'very well off financially.'
"Fast forward 40 years. Nearly three-quarters of UCLA freshmen surveyed in 2006 said being affluent is very important to them. A Pew Research Center poll mirrored those results. It found that among 18- to 25-year-olds in this country, 80 percent see getting rich as a top goal for their generation."

"Research has determined, when adjusted for inflation, that today's parents spend 500 percent more money on their children than just one generation ago. It's almost as if parents have an "allergic reaction" to their kids being unhappy."

Read the article here.
It seems like everyone wants to get rich. It's the gimmie-gimmie-gimmie attitude that permeates the younger generation. (Yes, I'm part of this younger generation. ) I don't know how we got so broken in the head, but I wish we could fix it.
Reply #14 from JoeUser Forums Top
don't know how we got so broken in the head, but I wish we could fix it.


HOw is easy. Because we (America) are more affluent. And kids dont want to start out with nothing, they want to go from Mom and Dad's lifestyle to the same thing, as soon as they leave the nest. Not realizing that Mom and Dad took 40 years to get there, and did not start out that way.
Reply #15 from JoeUser Forums Top
On a side note, any one object to Blue Hippo? I mean when was the last time anyone paid $1560 for a starter computer?  Yet they are a thriving business (a friend actually worked for them for a while).  It is the same thing.  Like Rent-a-Center and such.  People who want it all before they can afford it.
Reply #16 from JoeUser Forums Top
any one object to Blue Hippo? I mean when was the last time anyone paid $1560 for a starter computer?


I've seen those advertisements many times on TV and wondered what kind of exorbitant price they would be charging for those suckers. Wow. And these are POS computers that are still running Celeron processors and the like. And a price like that?

Instant gratification. That's the problem with my generation. Everything needs to be completely accessible and available at your fingertips.
Reply #17 from JoeUser Forums Top
I consider them the lowest form of scum, sharing positions with child molesters and old-lady rapists. I've worked in the 'we-serve-the-projects' credit business, and I rank the people who own these places around the same level as Osama bin Laden. I don't advocate violence against them, but if every one of them burst into flames at once I wouldn't shed a tear.

As a matter of fact I'd probably have to stifle a giggle. I think if our nation really had any values we wouldn't even ponder the government closing those places. The community would just tar and feather the usurers and ride them out of town on a rail. I wouldn't waste my spit on them.
Reply #18 from JoeUser Forums Top
On a side note, any one object to Blue Hippo? I mean when was the last time anyone paid $1560 for a starter computer? Yet they are a thriving business (a friend actually worked for them for a while). It is the same thing. Like Rent-a-Center and such. People who want it all before they can afford it.


Again, there's a way to defeat industries like this, if people want to. I've done the math, and I can put together a pretty decent starter computer system, complete with Windows XP Home and a monitor for a $480 baseline price, which I could make cheaper if they wanted me to install old drives or another OS (the O/S is $90 of that price tag alone). That's about 3-4 months of payments to Rent-a-Center, but it means you have to WAIT 3-4 months to get it. Nobody wants to do that, it seems.
Reply #19 from JoeUser Forums Top
As a matter of fact I'd probably have to stifle a giggle. I think if our nation really had any values we wouldn't even ponder the government closing those places. The community would just tar and feather the usurers and ride them out of town on a rail. I wouldn't waste my spit on them.


The sad thing is, the people that those who live in these communities consider to be "leaders" are not only not condemning these places, they are, at least in one case (Sharpton) PIMPING these places.

If Jesse Jackson cared about the projects, he'd put up businesses there and establish loan centers with more favorable rates. That would do FAR more for the poor than his extortionist practices currently do.
Reply #20 from JoeUser Forums Top

for a $480 baseline price

Dell does it cheaper.  The point is, that so many do not know the value of "$500" versus $30/week!

And that is sad.  They want it NOW. Not in a few months.

(due to my hot water heater - not installed by me - setting me back a bundle - when it went south - I am going to be late in building my Vista PC.  WHy?  Because i refuse to go into debt.  Experience?  Wisdom?  Or growing up poor?  Lately, I think the latter.  Unfortunately not too many these days understand that)

Reply #21 from JoeUser Forums Top
Dell does it cheaper


Not exactly. Their baseline computer ($359) does not include a monitor or free shipping (except during promotional times). You also do not get your disks (See my article "I Have Met the Devil, and His Name is Sony" for reasons that might be important down the road) unless you pay extra for them. The main advantage you get from Dell is that you can usually talk them into some software perks. But I can load the computer I mentioned with a whole host of freeware goodies that Dell would not even consider adding, including a complete office suite (OpenOffice). And I am MUCH cooler than some guy named "Steve" in Bangladesh.
Reply #22 from JoeUser Forums Top
(due to my hot water heater - not installed by me - setting me back a bundle - when it went south - I am going to be late in building my Vista PC. WHy? Because i refuse to go into debt. Experience? Wisdom? Or growing up poor? Lately, I think the latter. Unfortunately not too many these days understand that)


Yeah, washing machine's gonna do the same to us. But I should get my case mod going within the next couple months.
Reply #23 from JoeUser Forums Top
You also do not get your disks (See my article "I Have Met the Devil, and His Name is Sony" for reasons that might be important down the road) unless you pay extra for them.


You can mint your own. And I can get you one for $400 with a monitor. And I do HIGHLY recommend once getting it you mint your own!

I use to do computers cheaper like you. But Dell just made me a technician, and not an OEM.
Reply #24 from JoeUser Forums Top
Yeah, washing machine's gonna do the same to us


Damn utilities!
Reply #25 from JoeUser Forums Top
I use to do computers cheaper like you. But Dell just made me a technician, and not an OEM.


I don't actually "do" computers, I'm just saying it's possible. I'll build one if requested. And I could cut prices further if I wanted to push it, what I listed was my baseline. Dell isn't my competition; oddly enough, WalMart is. For some inexplicable reason, the uninitiated think that if WalMart carries it, it MUST be good.

The truth is, I can put together a better software suite than these manufacturers provide (not naming my sources...it's a trade secret). Most end users aren't going to know how to talk Dell into software deals, or how to burn their recovery disks, or how to find quality software for free or very low cost without downloading a whole smorgasboard of viruses to go with. And, as you know, a low end Dell is not any better quality than a low end eMachines. The main difference is the service and support.