During the last week or two, the financial industry has been seen in the news quite a bit. Most of what's being talked about is investing and mortgages.
However, it seems that as finances take center stage in the politics of this country, it will only be a matter of time before payday loans become the target of scrutiny and lobbyists once again.
Certain states have already banned payday loans outright. They feel the high APR is completely unjustified and a danger to consumers. Some states do allow payday lenders, but they have very strict regulations.
Other states, very few of them, allow payday lending with very little regulation. Lobbyists are working hard on both sides to either ban these short-term loans, or heavily regulate them to be "consumer friendly."
A payday loan, or cash advance, is a short-term loan designed to be paid back by your next payday. To understand payday loans better, we should become acquainted with the language of lending.
Principal- this is the initial amount of money borrowed by the consumer.
Term- this is the amount of time a borrower has to pay back the loan, plus interest.
Interest- the fee assessed by the lender to the borrower for the service of lending the money.
APR- Annual Percentage Rate; in other words, the percentage of the principal paid in interest in 1 year
Now let us examine how a lender can make money by handing it out. If a consumer borrows $500 on Monday and gets paid on Friday, then the term of the loan is five days. Interest is always measured in APR regardless of the term, so let's say the APR is 350%.
The consumer who borrowed $500 on Monday will pay their lender about $525 on Friday. The consumer had their money when they needed it and the lender was paid $25 for providing the consumer their money at the time they needed it.
ไม่มีความคิดเห็น:
แสดงความคิดเห็น