Trapped by Web Loan with 842% Interest Rate

Trapped by Web Loan with 842% Interest Rate

www.chicagotribune.com

People like Parker are falling through one of the newest trapdoors in the cash-strapped economy—online payday loans. Such loans typically were the province of payday loan storefronts that cater mostly to the working poor and low-middle-income workers, short on cash until payday. Now online loans are spreading to the middle class as a result of rising gasoline and food prices, tightening credit, the subprime mortgage fallout and the ease of home computer access to the Web.

"It's insane. It is growing like wildfire," said Henry Coffey, a Baltimore-based stock analyst who tracks the payday loan industry. One factor in the growth of online loans, which charge as much as 2,000 percent interest, is that they effectively hook borrowers into cycles of debt, often forcing people to take second and third loans to cover ballooning debts.

(visit the link for the full news article)

It never ceases to amaze me, the amount of predatory vultures who swoop in to prey upon people who are struggling and desperate. Welcome to the latest loansharking extraveganza--Online payday loans.

Hopefully people educate themselves about this type of stuff and don't get sucked into these traps. But sadly enough, I bet there will be tens of thousands, who out of desperation, fail to read the fine print and get further burried into this viscious cycle.

Once a person receives an online loan it's nearly impossible to shake loose from the lender's tentacles, said Jean Fox, a loan industry expert for the Consumer Federation of America and a critic of the payday loan industry.

When people borrow online they authorize the lender to electronically tap into their checking account, Fox said. Moreover, the borrower usually agrees to allow the lender to draw funds to pay down the loan even if the bank account has been closed or the account doesn't have enough money to make payments.

www.chicagotribune.com
(visit the link for the full news article)

I can't see how these loans don't run afoul of state usury laws. I can't imagine that it would stand up in a court.

That said, anyone who takes out a loan knowing that they're going to be charged such a hideous rate of interest needs to have their head examined.

Yet another example of businesses taking advantage of those in trouble who are too stupid to know what they're getting themselves into.

Hold onto your horses...before too long you're going to get dozens of posts in here about how great payday loans are.

Originally posted by vor78

That said, anyone who takes out a loan knowing that they're going to be charged such a hideous rate of interest needs to have their head examined.

The problem is, these loans have only become popular in the last few years, they are all over here, mixed in with all the pawn shops....

People are desperate, and if you have kids to feed, and no money till next payday, you will take the easy money now, knowing that you will have a problem in the future, but hungry kids are not something a parent wants... tomorrows problem is tomorows problem, today I eat.

I have personaly got cought in this mess, and it took me a couple years to get out of the mix... they have very very diabolical collections dept. that love to threaten with lawsuits, and garnishments...
State laws vary state to state regarding pay-day loans, and the methods collectors can use to obtain the money loaned.
There are NO debtors prisons, but the collection dept. will make you beleive otherwise..





[edit on 12-5-2008 by damntheptb]

This stuff is scary. I feel into the trap because I was desperate. A friend who was in a bad financial situation and had payday loans plural, with three different companies probably over 1500 dollars total, gave me the info. I could walk in and walk out with cash. It solved my problem, until I got paid that is, then almost my entire paycheck went to paying the loan and intrest, so guess what? I had to reborrow the loan. This went on for about 2 years, having to reborrow the loan at maybe 20-50 dollars less a payday, slowly paying it off. I don't even want to think about how much I lost paying the interest. Those folks made a lot of money off of me. It was the worst financial decision I ever made. Stay away from these no matter how desperate you get, it is not worth the money you will lose in the long run.