3 ms·

No, because the 806 number includes compounding.

• gojomo 17y ago
  It certainly does not include compounding; the 806 figure is derived from the stated weekly cost of $100 -- $15.5 -- times 52 weeks, a simple sum. A calculation of the annual rate based on 15.5% compounded weekly would be much, much worse. The effective annual rate is somewhat worse than 806%, because if you rolled over your $100 principal loan each week, paying just the $15.5 fees, then paid back the principal at the end of the year, you've paid $806 in interest, yes. And if that full interest payment had been made only at the end of the year, your annual rate would have been 806%. But you paid a lot of that early, so your effective rate was higher.
  • ambition 17y ago
    Yikes, you're right. That's obscene. I hope non-profits like Kiva are able to help in this area.
  • mattmcknight 17y ago
    Isn't the problem really that there are fixed costs associated with loans that are exaggerated on smaller ones when consider on a percentage basis? Looking at in terms of interest seems wrong, there should just be a fee.
• bena 17y ago
  But the loans are cyclical. You take out a $300 and have to pay $345 next week. Next week, since you are troubled financially, cannot make the payment, so you take a $345 loan and have to pay $400 next week. Continue until they cut you off and sic a collection agency on you.