John Leland from the New York Times is again discussing debt (he’s the one who interviewed me back in February). This time, he’s discussing payday loans and a new thing out there called non-profit payday loans.
Payday loans are notorious for charging huge amounts of interest in the neighborhood of 500%+. Way back when, I almost worked at a payday loan place and while I didn’t know too much back then about finance, I knew that the rates they charged were very high. Needless to say, I got a call back but I told them I wasn’t interested. Now that I know more about finance, I’m glad I did that.
Non-profit payday loans (sometimes called alternate payday loans) sound a little better. They are non-profit, right? But are they really that much better than payday loans?
“…alternative payday loans have also drawn criticism from some consumer advocates, who say the programs are too similar to for-profit payday loans, especially when they call for the principal to be repaid in two weeks. At GoodMoney, for example, borrowers pay $9.90 for every $100 they borrow, which translates to an annual rate of 252 percent.”
[Via New York Times.com]
I’ll give the non-profit payday loans one thing…compared to payday loans they are technically better since they have a lower interest rate and it appears that some organizations will work with you to try to help you with your debt. But that isn’t enough to help people avoid the debt traps that payday loans (of any type) create. To me, they will remain a prime example of predatory lending for they target those who have a need for money and little knowledge about interest rates.
I’ve read stories online from those who have been trapped by payday loans. I’ve even tried to get an interview once from someone that I’ve talked to, but it didn’t work out. If anyone reading would like to share their story about payday loans, I’d love to hear it and share it on here.