I don't think the percentage rate is that big a deal, even at 25% (although I'd probably go for ~15-20%, assuming 10% default rate and 5% cost of capital) -- th

I don't think the percentage rate is that big a deal, even at 25% (although I'd probably go for ~15-20%, assuming 10% default rate and 5% cost of capital) -- the area where I'd try to subsidize or otherwise avoid passing through cost/profit is fees. I'm fine with short term loans at 25%. As you say, $50 at 25% for a month is $1.04. The problem is when a $1-5 fee is applied on top of that, giving interest rates >100% annualized. That's the kind of usury which has been common in the US payday advance industry (although better now in most states after regulatory action), rent-to-own, etc.