This blog is intended for educational purposes only. None of these posts are meant to give legal or financial advice. If you need advice you should consult an appropriate professional.

Monday, February 4, 2013

beware of predatory lenders

There are businesses out there that take advantage of those in the most desperate of circumstances.  They are predatory lenders preying on the people who can least afford it.  Payday lenders will loan you money against your next payroll check at exorbitant interest rates.  You write them a postdated check for let's say $110 to get a $100 loan for a week.  If you calculate this in annual interest terms it's in the hundreds of percents.  Title loan businesses loan you money against the title of your vehicle.  The problem is if you don't follow the terms of the loan you could very well lose your wheels.  A car is a depreciating piece of machinery anyway.  Don't make it any worse than it already is.  Pawn shops loan money against junk usually or it could be something of value who knows.  If you want your item back you have to pay back the loan with steep interest rates.  If you don't pay it back you forfeit ownership and the pawn shop sells it.  Buy here pay here car lots deal with those who don't have the money or credit to go through more traditional channels.  You pay by the week to have a vehicle.  If you calculate it out though you'd be better off just saving your money and buying a beater.  In the business model they calculate a certain percentage of repossessions to still make a profit.  Rent to own centers let you pay by the week for things like TVs and computers.  Once again it's better to just find something used and pay cash for it.  Take the payments all the way to their conclusion, and you're paying through the nose for something that goes down in value anyway.  Refund anticipation loans are loans against your expected tax return.  It would be better to just wait for your actual tax return than deal with these high rate loans.  The lesson in all this is patience, planning, and discipline.  These qualities seem to be sorely lacking in our society.  That's why these places make so much money.  Just because it's legal doesn't make it right. 

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