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CLEVELAND (Reuters) - As hundreds of thousands of American home owners fall behind on their mortgage payments, more people are turning to short-term loans with sky-high interest rates just to get by.
While figures are hard to come by, evidence from nonprofit credit and mortgage counselors suggests that the number of people using these so-called "pay day loans" is growing as the U.S. housing crisis deepens, a negative sign for economic recovery.
A pay day loan is typically for a few hundred dollars, with a term of two weeks, and an interest rate as high as 800 percent. The average borrower ends up paying back $793 for a $325 loan, according to the Center.
Originally posted by oLDWoRLDDiSoRDeR
Hmm. Me an my old lady use one of these places . While they do make a buck its nothing like reported. We pay like 40$ for a 400$ loan . So we barrow $400 and pay back $440.
The first time you get a month to pay it back . After that you get the 2 weeks .
Originally posted by Rockpuck
reply to post by oLDWoRLDDiSoRDeR
On average its 125%-900% on these loans if they are not paid back on time. For instance, if you borrow $400 for two weeks and don't pay that back in two weeks you pay an interest on your interest.. an insane amount.. these institutions claim that such a high interest rate will incite people to pay back their debts, and that few ever have to pay that high of an interest rate for to long..
But 800% on $400 for even one day will be nearly impossible to pay back for someone who had to take one of these loans out to begin with.
The other MAJOR problem with these insitutions is they are very.. very picky on where they put up shop.
They prefer poor neighborhoods and especially military bases.
I live by an Air Force base and I can count at least 5 of these stores within a 5 miles radius.
They are not breaking a law though.. because its in the contract that no one ever reads, or maybe many think they can pay it back but can't.
And i feel for the people that need these places to survive..