How Does a Payday Loan Work?

Posted June 13th, 2009 by Medullan Marauder
in

1. Initial payday loan: The borrower writes a post-dated check for the payday loan amount plus any fees. For example, to borrow $500 for two weeks, the borrower writes a $575 check.

2. The loan rollover: The borrower assumes they will have enough money in their bank account in two weeks to pay off the payday loan. However, 90% of our profit is generated from borrowers who are not able to pay off the loan and are forced into a debt trap1.

3. The debt trap: The borrower takes out an additional payday loan to pay off the old loan. The average borrower takes out 9 payday loans per year2. On a $500 loan with $75 in fees every two weeks, this is $675 in profit at a lucrative 390% APR.

If anyone wants to know the way these goons operate, check out
http://www.dailypress.com/news/dp-payday-lobbyist.d20,0,397826.story
or
http://www.totalbankruptcy.com/overview/financial-literacy/lending/the-t...
http://www.scammer-alert.com/payday-loans.html
http://www.helium.com/knowledge/21555-the-truth-about-payday-loans

These folks are like The Firm, but with loan sharks instead of lawyers.


Informative post regarding

On June 16th, 2009 DominicM said:

Informative post regarding the loan process at payday loan. In addition to the article, in the United States, finance charges on payday loans are typically in the range of 15 to 30 percent of the amount for the two-week period, which translates to rates ranging from 390 percent to 780 percent when expressed as an annual percentage rate.


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