8 ms·

Say I live paycheck to paycheck and I need $500 to fix my car that I use to get to work until I get paid in a few weeks. Borrowing $500 for one month and payin

Say I live paycheck to paycheck and I need $500 to fix my car that I use to get to work until I get paid in a few weeks. Borrowing $500 for one month and paying $15 in interest would be completely worth it and beneficial to the borrower. That's what 36% annualized interest would look like for a single month. Do people get in trouble with debt? Yes. And that's why we have bankruptcy. But not everyone gets in trouble with debt. I don't think it's fair to make it unavailable to everyone to protect those that fall into arrears -- because, again, that's what bankruptcy is for.

zozbot234 5y ago
> Say I live paycheck to paycheck Well, that's your problem right there. Unless you have routine access to spending opportunities that yield more than 36% in yearly returns, which I'm going to assume is pretty unlikely.
- renewiltord 5y ago
  The easiest way to yield that kind of return is aborting on pre-committed spending. In fact, that's the way the poor generate this kind of income. If they have $100 for food this month and a sudden expense needs $50, then that means they just go hungry until their budget hits $50 for food this month. What you do is you starve a day or two and sell your food bank food. Everyone is capable of generating income while depleting from stores.
- baq 5y ago
  ‘Stop being poor’ is the usual advice given in that predicament.
  - dools 5y ago
    Don’t lean weird
jacquesm 5y ago
In other countries there are institutions such as municipal banks that will borrow you the money at a reasonably low interest rate. The US is fairly unique in having legal usury where loansharks are allowed to prey on poor people.
- davedx 5y ago
  UK: hold my beer…
  - edoceo 5y ago
    Can you expand?
    - jacquesm 5y ago
      The UK has payday loans as well. As do a few other countries.
bonzini 5y ago
If you live paycheck to paycheck, which is consistent with your total savings being less than $500, the chance that you will be able to pay back $515 on your next payday are basically zero.
- damiankennedy 5y ago
  I'm not so sure, living paycheck to paycheck doesn't mean you have no discretionary spending at all. Maybe you have $500 a month for one off expenses and you already used up this months on a laptop for you kid at school or something.
  - chii 5y ago
    and next month, another emergency. The root cause is low income, because with a higher income, such things won't be an emergency.
  - bonzini 5y ago
    One off expenses don't happen 12 times a year. If you haven't been able to save $100 a month for five months, you just won't be able to save five times as much, let's be realistic.
    - TheOtherHobbes 5y ago
      Poor people find that one off expenses happen surprisingly often. Between car breakdowns (far more likely for those who can only afford a clunker), sudden health crises, domestic maintenance, wear and tear on clothes, unexpected inflationary price rises on essentials like energy and food, and a host of other issues, the poor have no slack at all in their budgets. Of course the real problem is many jobs don't pay enough. In fact not getting paid enough - and therefore being unable to budget - is considered evidence of poor character, while not paying enough is considered evidence of enlightened and mature rationality. It's quite a strange view of the world.
      - emodendroket 5y ago
syki 5y ago
The question lawmakers ought to ask is what is more beneficial, overall, for society? Some will suffer by denying exorbitant interest rate loans. Some will benefit by restricting them. I suggest our society would be better by not having exorbitant rate loans be legal.
- adventured 5y ago
  Why should a society be structured by majority rule / majority benefit for such things, even if one agrees with your premise that society is supposedly better off (which I disagree with, you're not counting all the required consequences that go with re-ordering the system, you're pretending we're only talking about one thing)? Actual democracy is an extreme negative, not a positive approach to organizing society. You can claim the majority would benefit from eating the wealth of Sergey Brin and Larry Page at this point, they no longer operate Google, they're just ~50 year olds sitting on $200 billion in Google shares, piddling around until the day they die. So why not let society benefit sooner rather than later by consuming their wealth to its (supposed) benefit, divvy up their wealth to the poorest 51%. You can invent a huge number of scenarios for doing things like that, where society supposedly is better off if we violate the property rights of some minority group. Why shouldn't some minority of people be allowed to lend at 43% interest if there are takers at that rate? Because you say so? Why shouldn't their property rights be respected - the property right to lend their money out at the rates they can command - and why should the majority get to arbitrarily restrict their property rights? It sets up an obvious exploitation situation, which is always the case in democracy, where the majority can endlessly torture, exploit and abuse the minority. It would very clearly be better for the top 51% (far more than that actually) - the majority of society - if the economic bottom 10% did not exist (a group that rarely holds a job, has vast health & drug addiction problems, rarely pays taxes into the system, rarely contributes much of anything; and in fact that's true in nearly all welfare states, including the US). So they should all be gotten rid of, is that right? Democracy in action. The tax paying majority is sick and tired of carrying the never-tax-paying economic segments at the bottom, time to get rid of them, for the benefit of "society" (aka the majority power herd).
  - syki 5y ago
nikanj 5y ago
Alas, the more likely scenario is "I need $500 to fix my car. Damn piece of shit needs repair at least once or twice every year. If I had a brand-new F350, I would save so much money on repairs!" And they happily drive off the lot with a $80k car loan at 36%. People are, pardon my french, dumb as shit when it comes to car purchases. They are very happy to lose a guaranteed $10k/year in deprecation, so they won't get hit by a $2000 surprise bill.
- deleted 5y ago
  [deleted]
- ModernMech 5y ago
  The valuation of assets doesn’t matter when you have cash flow issues (especially when you can't sell that asset). It really doesn’t matter in the short term how fast an asset is depreciating as long as it’s doing the job in the short term. This is why people say it’s expensive to be poor. Someone with good cash flow can make better long term financial decisions.
  - nikanj 5y ago
    You're absolutely right, and it's so frustrating to see someone opting for additional $150 per month in car payments, because they couldn't afford a $500 repair, because they're already doing $350 per month in car payments.
- emodendroket 5y ago
  Most people don't make great decisions buying cars, rich or poor, but that logic isn't entirely specious. If your car spends weeks at a time in the shop, and you need it to get around, it's a false economy to keep fixing it instead of buying one that is reliable.
  - whatever1 5y ago
    But you don’t know it when you are in the process of fixing an old car. You pay $1000 and you think that you will be good for a couple of years. The reality is that after a couple of months you will probably need to fix something else. Flush and repeat.
aseipp 5y ago
- cowuser666 5y ago
  Which part is completely fake? Living paycheck to paycheck? A $500 cost? Or being able to come up with $15 within a month? Are you under the impression that nobody ever uses credit facilities with high interest without spiraling into bankruptcy?
heartbeats 5y ago
You're assuming that credit is only available at that price. If he has a car and a credible case to make that he'll be able to give them the money next month, surely he could get it cheaper than that?

zozbot234 5y ago

> Say I live paycheck to paycheck Well, that's your problem right there. Unless you have routine access to spending opportunities that yield more than 36% in yearly returns, which I'm going to assume is pretty unlikely.

renewiltord 5y ago
The easiest way to yield that kind of return is aborting on pre-committed spending. In fact, that's the way the poor generate this kind of income. If they have $100 for food this month and a sudden expense needs $50, then that means they just go hungry until their budget hits $50 for food this month. What you do is you starve a day or two and sell your food bank food. Everyone is capable of generating income while depleting from stores.
baq 5y ago
‘Stop being poor’ is the usual advice given in that predicament.
- dools 5y ago
  Don’t lean weird

jacquesm 5y ago

In other countries there are institutions such as municipal banks that will borrow you the money at a reasonably low interest rate. The US is fairly unique in having legal usury where loansharks are allowed to prey on poor people.

davedx 5y ago
UK: hold my beer…
- edoceo 5y ago
  Can you expand?
  - jacquesm 5y ago
    The UK has payday loans as well. As do a few other countries.

bonzini 5y ago

If you live paycheck to paycheck, which is consistent with your total savings being less than $500, the chance that you will be able to pay back $515 on your next payday are basically zero.

damiankennedy 5y ago
I'm not so sure, living paycheck to paycheck doesn't mean you have no discretionary spending at all. Maybe you have $500 a month for one off expenses and you already used up this months on a laptop for you kid at school or something.
- chii 5y ago
  and next month, another emergency. The root cause is low income, because with a higher income, such things won't be an emergency.
- bonzini 5y ago
  One off expenses don't happen 12 times a year. If you haven't been able to save $100 a month for five months, you just won't be able to save five times as much, let's be realistic.
  - TheOtherHobbes 5y ago
    Poor people find that one off expenses happen surprisingly often. Between car breakdowns (far more likely for those who can only afford a clunker), sudden health crises, domestic maintenance, wear and tear on clothes, unexpected inflationary price rises on essentials like energy and food, and a host of other issues, the poor have no slack at all in their budgets. Of course the real problem is many jobs don't pay enough. In fact not getting paid enough - and therefore being unable to budget - is considered evidence of poor character, while not paying enough is considered evidence of enlightened and mature rationality. It's quite a strange view of the world.
    - emodendroket 5y ago

syki 5y ago

The question lawmakers ought to ask is what is more beneficial, overall, for society? Some will suffer by denying exorbitant interest rate loans. Some will benefit by restricting them. I suggest our society would be better by not having exorbitant rate loans be legal.

adventured 5y ago
Why should a society be structured by majority rule / majority benefit for such things, even if one agrees with your premise that society is supposedly better off (which I disagree with, you're not counting all the required consequences that go with re-ordering the system, you're pretending we're only talking about one thing)? Actual democracy is an extreme negative, not a positive approach to organizing society. You can claim the majority would benefit from eating the wealth of Sergey Brin and Larry Page at this point, they no longer operate Google, they're just ~50 year olds sitting on $200 billion in Google shares, piddling around until the day they die. So why not let society benefit sooner rather than later by consuming their wealth to its (supposed) benefit, divvy up their wealth to the poorest 51%. You can invent a huge number of scenarios for doing things like that, where society supposedly is better off if we violate the property rights of some minority group. Why shouldn't some minority of people be allowed to lend at 43% interest if there are takers at that rate? Because you say so? Why shouldn't their property rights be respected - the property right to lend their money out at the rates they can command - and why should the majority get to arbitrarily restrict their property rights? It sets up an obvious exploitation situation, which is always the case in democracy, where the majority can endlessly torture, exploit and abuse the minority. It would very clearly be better for the top 51% (far more than that actually) - the majority of society - if the economic bottom 10% did not exist (a group that rarely holds a job, has vast health & drug addiction problems, rarely pays taxes into the system, rarely contributes much of anything; and in fact that's true in nearly all welfare states, including the US). So they should all be gotten rid of, is that right? Democracy in action. The tax paying majority is sick and tired of carrying the never-tax-paying economic segments at the bottom, time to get rid of them, for the benefit of "society" (aka the majority power herd).
- syki 5y ago

nikanj 5y ago

Alas, the more likely scenario is "I need $500 to fix my car. Damn piece of shit needs repair at least once or twice every year. If I had a brand-new F350, I would save so much money on repairs!" And they happily drive off the lot with a $80k car loan at 36%. People are, pardon my french, dumb as shit when it comes to car purchases. They are very happy to lose a guaranteed $10k/year in deprecation, so they won't get hit by a $2000 surprise bill.

deleted 5y ago
[deleted]
ModernMech 5y ago
The valuation of assets doesn’t matter when you have cash flow issues (especially when you can't sell that asset). It really doesn’t matter in the short term how fast an asset is depreciating as long as it’s doing the job in the short term. This is why people say it’s expensive to be poor. Someone with good cash flow can make better long term financial decisions.
- nikanj 5y ago
  You're absolutely right, and it's so frustrating to see someone opting for additional $150 per month in car payments, because they couldn't afford a $500 repair, because they're already doing $350 per month in car payments.
emodendroket 5y ago
Most people don't make great decisions buying cars, rich or poor, but that logic isn't entirely specious. If your car spends weeks at a time in the shop, and you need it to get around, it's a false economy to keep fixing it instead of buying one that is reliable.
- whatever1 5y ago
  But you don’t know it when you are in the process of fixing an old car. You pay $1000 and you think that you will be good for a couple of years. The reality is that after a couple of months you will probably need to fix something else. Flush and repeat.

aseipp 5y ago

cowuser666 5y ago
Which part is completely fake? Living paycheck to paycheck? A $500 cost? Or being able to come up with $15 within a month? Are you under the impression that nobody ever uses credit facilities with high interest without spiraling into bankruptcy?

heartbeats 5y ago

You're assuming that credit is only available at that price. If he has a car and a credible case to make that he'll be able to give them the money next month, surely he could get it cheaper than that?