What Predatory Loans Will Cost You
Predatory payday loans can trap borrowers with high APRs well over 1,000% and hidden refinance policies buried deep in the fine print. To combat these debt cycles, responsible alternatives, like Possible, offer transparent installment repayment, no hidden rollovers and zero late or NSF fees.
Transcript
[DAYNOR]
This example was so shady they actually got sued by the federal government. I wanna walk you through the very reason that Possible Finance was started to fight back against some of the predatory lending practices. Here is a payday loan agreement. Let's take a look.
[JARGON MAN]
We've got an annual percentage rate, APR. That's the cost of your credit as a yearly rate of 1,130.92%.
[DAYNOR]
Wow. Over a thousand percent APR. Keep in mind that an APR is an annual percentage rate, so that is a statement of the cost of credit over the course of the year. For many payday loans, the term will never reach a year. So the APR can be a little bit misleading and overstate the cost of credit.
However, for a lot of predatory lenders, the APR is the right metric because they allow you to renew and roll over your loans, and often the term can go well beyond a year.
[JARGON MAN]
Then, a finance charge, the dollar amount the credit will cost you of $116.19 cents.
[DAYNOR]
So it looks like you're paying $116.19 cents just to borrow $250.
That is a very expensive loan. But then a full 11 paragraphs below it says,
[JARGON MAN]
"Refinance policy: Unless otherwise notified your account will be debted the minimum amount due to refinance this loan for another term."
[DAYNOR]
Whoa, that sounds extremely sketchy to me. I have a lot of questions. What is a renewal fee?
What does this mean? Why is it hidden 11 paragraphs below all of the financial information, like they wanna hide it from us. And keep in mind, these payday loans typically have a 14 day term. You have to pay the whole amount back or it will refinance or renew, or whatever this paragraph means. And because this example was so shady, they actually got sued by the federal government, the Federal Trade Commission sued this lender. They were trying to trap customers, and I think customers deserve better. We started Possible to put an end to these types of predatory lending practices. You can borrow from us, pay us back over time, build your credit history and we do not charge late fees. We do not charge NSF fees.
We will not penalize you. We don't allow rollovers or renewals. You can extend your payment up to 29 days with no credit impact to give yourself breathing room. This has been an episode of Small Print Made Simple. Follow us for more.
