How Do Payday Loans Work Blog

It seems everyone is trying to grab headlines these days, but its one thing to promote a point of view, and quite another to outright mislead people about it.  However, that is exactly what the CRL (Center for Responsible Lending) is doing.  In a recent article posted by the Earthtimes (read it here), they provide details and points that are very accurate and reflect the true structure of short term loans as well as provide many detailed points about why the CRL is misleading people with the press releases.

The biggest concern is over the suggested APR that many short term or payday loans have. They try to make it sound like these loans are completely unreasonable and have such high ARP that it’s a crime and that regulators need to step in and do something about it. However, the article shows that these deceiving practices are merely smoke stacks to get people to think there is a fire when really it’s not the case. The point the article makes is that the 400% APR that everyone is talking about is not actually 400%, but really 15%.  Why the big difference and how are they getting away with it.  The fact is that most of these loans are capped at $15 dollars per $100 borrowed, or 15%.  However, they try to make it sound like it’s 400% by saying APR. However, APR stands for annual percentage rate, which means that the person is making 26 payments and not just 1.  If a person took out a payday loan, and decided not to pay it back when due and rather keep rolling over the same amount for an entire year, then it would be 400%.  The fact is that many of these loans are done with 1 or 2 payments, which would put the APR at only 15%.  This tactic is very negative and tries to make it sound like these short term loans places are merely taking advantage of people, and that is not the case.  It would be nice if people started reported the facts, and not just made up numbers or what if scenarios and trying to peddle them as the truth.

Please feel free to read more at the following link.

http://www.earthtimes.org/articles/show/center-for-consumer-freedom-center,781937.shtml

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