As I reviewed what was going to be on the Ohio Ballot this year, I came across Issue 5. This referendum would cap payday loans to a maximum of 28% APR. What is appalling is that the current cap is 391% ($15 interest on a 2-week $100 loan).
Unfortunately, the people who use these loans frequently get cought up in a debt trap they don’t anticipate. Take this post on wisebread.com for example (hat tip to workathomemomrevolution). Users of these loans are in a hard spot and are taking these loans to make ends meet. They borrow money from one lender then find they cannot pay them back when they are due. They take out another loan from a different vendor (also at these exhorbitant interest rates) so they can pay off the first loan. The cycle continues, putting these people who are already over their heads even further into debt.
I have no issue with the free market, but I do have issue with people blatantly taking advantage of people in this situation. A loan at reasonable rates is one thing, but loaning money at these rediculous rates is totally another.
With every confidence in the world, let me just say… NEVER take out a payday loan! It is one of the quickest ways to find yourself buried beyond belief in a debt cycle that is nearly impossible to get out of.
Do you support these loan companies? Have some first-hand experiences you’d like to share?
Written by Matt on October 7, 2008
I don’t support predatory payday lending. Payday lending is a scourge on our families, our communities and our economy. There are too many Ohioans caught in the never-ending cycle of debt as a result of walking into a payday loan store. The Ohio payday lobby would have you believe that they are just out to help when things get tough. They fail to mention that the success of their product is contingent upon borrowers being trapped in debt for months, if not years. Let me pose this question to folks: if payday lending is so great, why is it that their television ads NEVER mention payday lending? Perhaps it’s because voters don’t support predatory lending, 391% APR interest or people drowning in debt.
We need reform! Vote yes on issue 5!
Wow! It’s good to see this coming to a vote! Do come back to Wise Bread and let us know how it goes, won’t you? (And thanks for the generous link.)