Page 12 - A Guide To Financial Health v2

The people who need help the most are the ones susceptible to the most

harmful “services.” The $9 billion payday loan industry is predicated on

taking money from people at the precise moment they’'re most vulnerable.

Payday loan stores—which out number McDonalds and Burger Kings

combined in the United States—offer short-term loans that can have fees

that are equivalent to 400% APR. When compared with APRs for traditional

personal loans, which range from 6% to 36%, the rates on payday loans fall

squarely into predatory territory.

“Payday lenders target millions of low-income

consumers who have little to no savings and live

paycheck to paycheck.”

– MOTHER JONES

Payday loans are profitable because the providers trap customers in cycles

of debt. The Center for Responsible Lending found that only 1% of these

loans are given to borrowers who can pay their loan off within the allotted

two weeks. According to the Consumer Finance Protection Bureau, 80% of

borrowers can’t repay their loan within two weeks, at which point the fees

soar to the equivalent of a 521% interest rate—and keep going up every

time a new due date comes and goes. When all is said and done, the average

consumer pays $1,105 to borrow just $325.