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"Insisting that the only alternative to missing payments is with obscene-interest loans " The money has to come from somewhere and the interest rate is based o

"Insisting that the only alternative to missing payments is with obscene-interest loans " The money has to come from somewhere and the interest rate is based on risk. If someone doesn't have any credit, it's most likely because they have no income or had credit and defaulted. This is high risk and should have a high risk accordingly. The other question is, why can't they get credit from a bank? I could get a $5000 line of credit at 18 years old..and I had no connections, a low-paying job, and no credit history. The only way you can't get credit is if you continue to misuse the system and become a risk to everyone. We should be investing in more financial education.

ktRolster 11y ago
> We should be investing in more financial education. Yes. If you are making a startup related to payday loans (like this one: https://www.lendup.com/ https://www.lendup.com/ ) make sure that you include a financial education program in there somehow.
st3v3r 11y ago
The interest rate is NOT based on risk. It's based on them being able to do it because these people have no alternative. It's usury, plain and simple, and should be stopped.
- Karunamon 11y ago
  The entire idea of a payday loan is necessarily high risk for reasons discussed ad nauseum, and that dictates the interest rate. There would be no payday loans (smallish quantities of cash for short periods) without commensurately high interest rates. There's a very real risk of default, and smaller amounts of cash are not economical to process. (Have yet to see one that allows you to borrow <$100) Put another way, imagine you're a VC type and want to disrupt payday loans. You do this by loaning money at more reasonable APRs - say something like 15%. On a one week loan at $300, your profit isn't even 25c. Even with economies of scale, even with all the automation and tech SV can muster, this operation won't even pay its own infrastructure bills. One default and you've wiped out weeks of profit. Removing the option removes a useful and occasionally necessary tool for emergencies.
  - st3v3r 11y ago
    Nobody is saying not to allow payday loans. What's being said is to stop the unethical and usurious lending practices. I'm sorry, but being a "useful tool" is NO EXCUSE for what's being done.
    - Karunamon 11y ago
      Those two things are flatly equivalent, because short term loans do not work without high interest rates to both make the loans even a little profitable and to offset the absurd risk. High interest rates are not automatically abusive just because you'd like them to be.
FireBeyond 11y ago
What was the last payday loan chain you saw go bankrupt? It's extremely profitable as an industry, if not on margin, on volume. If it were so risky, they'd not be in it. They're making out very very well.

ktRolster 11y ago

> We should be investing in more financial education. Yes. If you are making a startup related to payday loans (like this one: https://www.lendup.com/ https://www.lendup.com/ ) make sure that you include a financial education program in there somehow.

st3v3r 11y ago

The interest rate is NOT based on risk. It's based on them being able to do it because these people have no alternative. It's usury, plain and simple, and should be stopped.

Karunamon 11y ago
The entire idea of a payday loan is necessarily high risk for reasons discussed ad nauseum, and that dictates the interest rate. There would be no payday loans (smallish quantities of cash for short periods) without commensurately high interest rates. There's a very real risk of default, and smaller amounts of cash are not economical to process. (Have yet to see one that allows you to borrow <$100) Put another way, imagine you're a VC type and want to disrupt payday loans. You do this by loaning money at more reasonable APRs - say something like 15%. On a one week loan at $300, your profit isn't even 25c. Even with economies of scale, even with all the automation and tech SV can muster, this operation won't even pay its own infrastructure bills. One default and you've wiped out weeks of profit. Removing the option removes a useful and occasionally necessary tool for emergencies.
- st3v3r 11y ago
  Nobody is saying not to allow payday loans. What's being said is to stop the unethical and usurious lending practices. I'm sorry, but being a "useful tool" is NO EXCUSE for what's being done.
  - Karunamon 11y ago
    Those two things are flatly equivalent, because short term loans do not work without high interest rates to both make the loans even a little profitable and to offset the absurd risk. High interest rates are not automatically abusive just because you'd like them to be.

FireBeyond 11y ago

What was the last payday loan chain you saw go bankrupt? It's extremely profitable as an industry, if not on margin, on volume. If it were so risky, they'd not be in it. They're making out very very well.