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Posted on 2/16/16 at 8:25 pm to stevengtiger
I'm fine with it. If the profit margins are really that obscene after factoring in the default rate, then why haven't competitors come in and driven the loan rates down?
And if this is the profitable interest rate that the market has found for this target group, they why should we deny these people the chance to borrow money even at a high cost? The alternative is that a black market would fill the void, and they would be in debt to gangs and loan sharks instead.
And if this is the profitable interest rate that the market has found for this target group, they why should we deny these people the chance to borrow money even at a high cost? The alternative is that a black market would fill the void, and they would be in debt to gangs and loan sharks instead.
Posted on 2/16/16 at 8:57 pm to Bayou Tiger
I honestly don't understand how anybody calls these businesses sleezy and that they "prey" on the poor.
They offer a business model that is obviously at a point that opening and operating with slimmer margins isn't attractive enough to offer competition.
Again, what's the alternative? Nothing? Who wins then?
They offer a business model that is obviously at a point that opening and operating with slimmer margins isn't attractive enough to offer competition.
Again, what's the alternative? Nothing? Who wins then?
This post was edited on 2/16/16 at 8:58 pm
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
Posted on 2/17/16 at 9:41 am to lynxcat
I understand the image that many people have of these places, and I'm sure this conversation could go on and on, but I'll say this, many of these people are damned if they do and damned if they don't.
At the end of the day, this business offers people who truly want to just keep the lights on/feed their family and create a bridge between pay checks, the opportunity to do so. Nobody else offers them this opportunity. An individual can go and bridge that gap for a fee of $15 per $100 to be repaid in 2 weeks. That doesn't sound unreasonable to me, and in fact it sounds downright reasonable considering these people have a history of failing to pay their debts.
The fact of the matter is that many times these people continue to be irresponsible and end up in a sinking ship. I have a hard time blaming anybody else for that.
The "helpless" people that got "suckered" in to these payday shops are viewed as the victim, and the business is demonized. We take personal responsibility out of the equation and ignore basic economics.
It's not that I don't empathize with some of these people, it's that I just don't think there is any alternative outside of subsidizing poor decision makers with tax payer money and create a govt payday loan program, and I can only imagine the abuse and the shitshow of a program it would create.
At the end of the day, this business offers people who truly want to just keep the lights on/feed their family and create a bridge between pay checks, the opportunity to do so. Nobody else offers them this opportunity. An individual can go and bridge that gap for a fee of $15 per $100 to be repaid in 2 weeks. That doesn't sound unreasonable to me, and in fact it sounds downright reasonable considering these people have a history of failing to pay their debts.
The fact of the matter is that many times these people continue to be irresponsible and end up in a sinking ship. I have a hard time blaming anybody else for that.
The "helpless" people that got "suckered" in to these payday shops are viewed as the victim, and the business is demonized. We take personal responsibility out of the equation and ignore basic economics.
It's not that I don't empathize with some of these people, it's that I just don't think there is any alternative outside of subsidizing poor decision makers with tax payer money and create a govt payday loan program, and I can only imagine the abuse and the shitshow of a program it would create.
Posted on 2/17/16 at 10:53 pm to LSUAfro
What's sad is they won't loan to military personnel in LA but if you are on Social Security or disability no problem. How will they ever get out of the hole. As far as profitable on a $350 loan they get $55 every two weeks forever til the loan is paid off. They average 200-300 customers. There is a reason their is at least 10 on Florida Blvd. alone.
Posted on 2/17/16 at 11:10 pm to LSUAfro
quote:
LSUAfro
You make a perfect economic argument. I do not disagree win any of the theory.
The problem is the information gap. These people are not intelligent enough to know what they are agreeing to. All they know is that they are getting some cash.
I actually think it would be better for the businesses not to exist and for the poor to find another way. It would save them from themselves. This is not a fiscally conservative view though.
I can talk out of both sides...I have not clearly made a stand on one side
This post was edited on 2/17/16 at 11:11 pm
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