Sunday, November 25, 2012

Why Does This Country Allow Such Loans

The Old Testament is replete with references condemning taking advantage of the widowed, the orphaned, and the downtrodden. We can readily understanding why ancient Israel that usury was more than an ethical, it was viewed as a criminal activity. Those who are the most vulnerable, the least educated, the least capable of understanding business matters, and those in the most desperate straits financially, are prime prey for wily people.

Payday loans are a form of usury. I am aghast how those who posture themselves as running for office on “biblical values” look the other way on these loans. Payday and title loans are enticingly packaged as a service, but they are anything but a service for anyone but the lender as the loan terms are designed to keep as many people as possible “paying off the loan” as long as possible. Annual interest rates in excess of 40% are not uncommon, sometimes even greater than 50%. That these firms tend not to freely publish their rates on the net speaks further volumes as to the predatory nature of their loans.  

There is an ad running that targets those who are caught in the payday loan trap by enticing the victims to take out a loan with them so as help them retire their payday loan. The firm is offering to rescue usury victims with another usury loan with an annual interest rate that is excess of 89%.

The ad offers quick loans of $10,000 with payment plan over 84 months at a rate of 89%. The victim would be paying $751 a month. The principle would be recovered by the lender in 14 months, the remaining months are all profit. Comparing this to the common new car loan rate of 6.9%, a $10,000 loan would have payments over 84 months of $150.43. A rate of 26.9% (a high side credit rate) would have payments of $265.38 over 84 months.
That these outragious predatory loans all permitted speaks volumes about the nation's values. 

No comments: