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Saturday, November 20, 2004

The problem with payday

Some payday loan companies are positioning themselves for a Wall Street payday. (PennLive: Payday loan companies looking for new growth on Wall Street.)

In a typical payday loan, a customer writes a personal check for the amount, generally $500 or less, to be cashed in two weeks. The lender charges a fee for the money, usually between $10 and $40 per $100 borrowed.
Critics say such fees equal annual percentage interest rates of 300 percent or more and that many customers get trapped, unable to pay back the principal and continually renewing the debt. In some cases, they say, customers end up paying more in interest than the loan itself.

Payday loan companies are popping up around here like poisonous mushrooms on a miserably and hot humid summer night. It seems like every strip mall has at least one such company. One street in particular is loaded with payday loan companies, title loan companies, and even a company that pays cash for your house.

I don't know so much about the last one. I do know several people who have gotten tangled up in payday and title loan schemes. All of them say it's not a solution to a financial problem and that it only leads to more problems. All of them have suffered more as a result of taking payday loans than they would have without. All of them say they wish they'd never heard of payday loans. None of them came out of it with their dignity.

Posted by Marie at November 20, 2004 11:48 PM