It is difficult to ignore the media reports that a payday lender no fax charges 1.000% for a loan. Such amazing crashes April, the conscience, especially when one considers that many of us pay less than 10% APR for the majority of our mortgage, car and other debts. Even credit cards normally Most do not charge us more than 15% to 20%. So how in the world do these cash advance stores and online lenders loan payday escape with three and four digit APR? It is that history is a bit more involved than the media and some advocacy groups would have us believe.
The first problem is that an annual percentage rate is a terribly misleading measure of the cost of a loan of 7 to 30 days. It would be like measuring the cost olive oil by the gallon, which would certainly exceed $ 100. But do not use olive oil by the gallon, and borrowers have no outstanding loans payday for a year. In fact, a revolving credit card charging 10% interest can cost a borrower more than a 7-day 500% the payday loan.
The second problem is that not all payday lenders are making enormous profits. Imagine what happens in a cash advance of $ 100 for the lender charges a fee of $ 15. Only the overhead of the lender must pay employees, lease or windows of the shopping cart, and whether online, pay to develop and maintain an Internet presence. As for the loan, the payday lender must spend money to evaluate the borrower and make the loan, not to mention the cost of defaults. For this reason, many academic studies have found that the costs of the industry day payment largely justify the price of a loan.
And finally, there is significant competition within the industry of payday loans. A borrower who has been online and many store front options when considering a loan. This competition moves naturally the cost of these loans at a level competitive, given the costs associated with the loan.
Payday loans can be expensive, especially for chronic borrowers. But there is good evidence that the cost of a payday loan justifies the price. , The legislation sets limits on interest rates of a payday lender can charge, such as Ohio, simply drives the industry out of state. The result will send many of the borrowers on the black market unregulated usury. And this is the legislatures states of the last thing you should want.
About the Author:
David Roberts helps to educate consumers about payday loans at No Fax Payday Loans Direct
Article Source: ArticlesBase.com – Are Payday Loan Companies Money Hungry Charlatans?