2 ms·

Can you really? Do payday loan customers typically comparison shop?

robert_foss 8y ago
To further reinforce this point, find me a payday lender that up-front lists their Annual Percentage Rate. They really don't which makes comparisons impossible or very hard work.
- mikeash 8y ago
  Sure, but everyone who needs their car repaired today so they don’t get fired tomorrow definitely takes the time to survey all of their local payday lenders, then sits down with a calculator and carefully works out how much each one will ultimately cost them before choosing the cheapest one. (Hopefully obvious sarcasm is obvious, but one can never tell.)
cr0sh 8y ago
> Do payday loan customers typically comparison shop? I'd say that if they were savvy enough to comparison shop, they wouldn't be payday loan customers. Look at the person in the article, Angela. She started out @ $300 for approximately $75.00 interest (25%). But now she owes who-knows-how-much with a yearly interest rate of 300%! Yet she still thinks she could pay it back! She did this because she doesn't trust herself with credit cards; the truth should be she shouldn't trust herself to borrow and pay back loans without incurring further debt and higher interest rates. Had she actually comparison-shopped, she would've found that a credit card - if she could get one - would likely have had a lower interest rate over the same time period, and couldn't rise anywhere near what the yearly rate she has now with the payday loan company. This is definitely predatory lending; these companies are lending to people who don't seem to have an understanding of certain basic financial concepts, or if they do, they don't have any clue how it will impact them. It would be a different case if the borrowers all knew that "yes, this is a crap loan with bad interest, but I don't have a choice, and I know I have to pay it back fast or I'm hosed". Some of them do. But I would wager that the vast majority don't, for a variety of reasons, not all of them due to ignorance (I imagine for some there might be some cultural and/or language barriers as well). These companies are taking extreme advantage of this, to their profit and to their customers detriment. The really astounding thing are their customers, like Angela, who seem to think all of this happening is a good thing. I just really don't understand this kind of mindset, of borrowing money at any and all costs with little to gain in the end (it isn't like all of these people are borrowing money to make an investment in some manner, to make a larger gain and pay back the loan with extra in their pocket - maybe some are, but I doubt they are in the majority). If you need an unsecured loan for something you can't afford to pay cash for today, you likely won't be able to afford to pay off the loan for it tomorrow. If you can - then you must. You don't just keep taking out more loans to keep covering the old loans (which is how a lot of these lenders work; the borrower finds they are unable to pay back the loan plus interest when the note comes due, so the lender extends the loan and ups the rate a bit - rinse and repeat until they default).
1123581321 8y ago
Yes, typically through word-of-mouth reputation.

To further reinforce this point, find me a payday lender that up-front lists their Annual Percentage Rate. They really don't which makes comparisons impossible or very hard work.

mikeash 8y ago
Sure, but everyone who needs their car repaired today so they don’t get fired tomorrow definitely takes the time to survey all of their local payday lenders, then sits down with a calculator and carefully works out how much each one will ultimately cost them before choosing the cheapest one. (Hopefully obvious sarcasm is obvious, but one can never tell.)

cr0sh 8y ago

> Do payday loan customers typically comparison shop? I'd say that if they were savvy enough to comparison shop, they wouldn't be payday loan customers. Look at the person in the article, Angela. She started out @ $300 for approximately $75.00 interest (25%). But now she owes who-knows-how-much with a yearly interest rate of 300%! Yet she still thinks she could pay it back! She did this because she doesn't trust herself with credit cards; the truth should be she shouldn't trust herself to borrow and pay back loans without incurring further debt and higher interest rates. Had she actually comparison-shopped, she would've found that a credit card - if she could get one - would likely have had a lower interest rate over the same time period, and couldn't rise anywhere near what the yearly rate she has now with the payday loan company. This is definitely predatory lending; these companies are lending to people who don't seem to have an understanding of certain basic financial concepts, or if they do, they don't have any clue how it will impact them. It would be a different case if the borrowers all knew that "yes, this is a crap loan with bad interest, but I don't have a choice, and I know I have to pay it back fast or I'm hosed". Some of them do. But I would wager that the vast majority don't, for a variety of reasons, not all of them due to ignorance (I imagine for some there might be some cultural and/or language barriers as well). These companies are taking extreme advantage of this, to their profit and to their customers detriment. The really astounding thing are their customers, like Angela, who seem to think all of this happening is a good thing. I just really don't understand this kind of mindset, of borrowing money at any and all costs with little to gain in the end (it isn't like all of these people are borrowing money to make an investment in some manner, to make a larger gain and pay back the loan with extra in their pocket - maybe some are, but I doubt they are in the majority). If you need an unsecured loan for something you can't afford to pay cash for today, you likely won't be able to afford to pay off the loan for it tomorrow. If you can - then you must. You don't just keep taking out more loans to keep covering the old loans (which is how a lot of these lenders work; the borrower finds they are unable to pay back the loan plus interest when the note comes due, so the lender extends the loan and ups the rate a bit - rinse and repeat until they default).

1123581321 8y ago

Yes, typically through word-of-mouth reputation.