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Aug. 28, 2006
I worked for a large bank for several years processing a variety of loans. One thing I learned is most people do not really understand how APR works. APR does not help people accurately depict the cost of the loan. You used the example of a $100 loan at 400% APR only costing $16 in interest. Pretty easy math; the cost of the loan is only 16%. A $135,000 home loan at 6.25% APR will cost $165,000 in interest. The cost in interest is 122% of the loan. APR looks great when measuring the interest you will pay for a large, long term loan, but only scares and confuses most people when using it to measure the cost of a small loan. I have used small loans like this several times and have been very satisfied. Without access to small loans I would not have been able to purchase food or other necessities for weeks at a time. I do feel there are unethical lending practices by many small loan companies that need to be addressed. Targeting and eliminating these practices and educating people on smart financial decisions should be our focus. A 36% cap on APR would not be a good fix. It would eliminate options for many people who are not rich or have the best credit to access funds when they need it. It would eliminate options to build credit and improve financial futures for many people who are unable to access banks or credit unions. It would eliminate thousands of jobs, millions of dollars and would devastate the economy. Let’s look for solutions that would target the real problems, help the economy, and not eliminate options that benefit many people.
A Federal usury cap corresponding to the DOD's cap is long overdue.
Concise, well articulated and spot on. I have researched this subject matter previously and i concur with the author of this article.
Article ignores the fact that bank NSF fees are the real problem, not payday lenders. Also, why is the media pushing for a socialist government. Big brother government is never good for its citizens. DOn't you guys study history?
A Strategy To Centralize Lending And Inc...
Sophisticated Financial Tools Offer Big ...
Case Study: How Collaboration Creates Ad...
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