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re: Payday Lending
Posted on 2/16/16 at 9:25 pm to stevengtiger
Posted on 2/16/16 at 9:25 pm to stevengtiger
That high interest is called risk for that business. Basically if someone does pay it back it covers all of the other idiots that can't and will not pay it back. Make sense? High risk on both ends.
Posted on 2/16/16 at 11:19 pm to TigerGM
You can explain it theoretically as much as you want. I understand the economic theory as well as anyone but economics assumes an understanding of the facts of the situation.
The reality is that the people who use payday loans have no concept of interest. All they know is they have a a bill due tomorrow and need cash now. Their debt then snowballs and they can't get out of it - because they don't understand the principles of interest. Even when they make a payment, they don't know why the amount they owe hasn't gone down since the last payment.
There are a lot of financially illiterate people. Pay day loans abuse them. The economic purist has every right to plead "they should know what they are doing" but the reality is they do not.
The reality is that the people who use payday loans have no concept of interest. All they know is they have a a bill due tomorrow and need cash now. Their debt then snowballs and they can't get out of it - because they don't understand the principles of interest. Even when they make a payment, they don't know why the amount they owe hasn't gone down since the last payment.
There are a lot of financially illiterate people. Pay day loans abuse them. The economic purist has every right to plead "they should know what they are doing" but the reality is they do not.
This post was edited on 2/17/16 at 9:24 am
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