Author Topic: 116% APR, what a deal!  (Read 5230 times)

Nederstash

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116% APR, what a deal!
« on: August 16, 2016, 04:13:09 PM »
I'll just leave this here and back away slowly...

human

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Re: 116% APR, what a deal!
« Reply #1 on: August 16, 2016, 04:27:10 PM »
If people only make 12 payments they will still make a decent return . . . crazy!

Goldielocks

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Re: 116% APR, what a deal!
« Reply #2 on: August 16, 2016, 04:50:46 PM »
I'll just leave this here and back away slowly...

If people just wait 10 months, they would have $5000, too.  Free and clear...!!!

AH013

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Re: 116% APR, what a deal!
« Reply #3 on: August 16, 2016, 04:53:48 PM »
Just think of the obscene interest rate as reparations.  hahaha

Yeah, they were terrible, but they've been shut down for almost 3 years now because of how angry they got consumers.

Of course, since they didn't operate within the context of any state or US federal law, I believe they had squat in terms of rights to take you to court if you don't pay.  They just preyed on fear.  So if you were super savvy, you could take out a huge loan, not make a single payment and so long as you didn't step foot on the Cheyenne River Indian Reservation in South Dakota, you'd be good.  Heck, I'd take that.

human

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Re: 116% APR, what a deal!
« Reply #4 on: August 16, 2016, 05:39:53 PM »
I'll just leave this here and back away slowly...

If people just wait 10 months, they would have $5000, too.  Free and clear...!!!

These loans are for people like my dad who are facing eviction or getting the power cut off for not paying bills. Can't wait ten minutes let alone 10 months, but of course I know what you're getting at.

forummm

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Re: 116% APR, what a deal!
« Reply #5 on: August 16, 2016, 05:55:52 PM »
117% APR is cheap for payday loan standards.

MoneyCat

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Re: 116% APR, what a deal!
« Reply #6 on: August 16, 2016, 10:07:58 PM »
In my darkest days circa 2007, I nearly took out a payday loan. Then, I drank until I passed out and woke up and started reading the MyFico Forums instead. Changed my life immeasurably.

TheGrimSqueaker

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Re: 116% APR, what a deal!
« Reply #7 on: August 16, 2016, 10:22:56 PM »

JAYSLOL

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Re: 116% APR, what a deal!
« Reply #8 on: August 17, 2016, 08:40:19 AM »
What the hell, that's over $40k in payments on a $5k loan?!?!!  How the fuck is this a thing!?!?!?

forummm

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Re: 116% APR, what a deal!
« Reply #9 on: August 17, 2016, 09:05:19 AM »
What the hell, that's over $40k in payments on a $5k loan?!?!!  How the fuck is this a thing!?!?!?

The lenders make money doing it. And pay off the politicians to continue to allow it. Some states did actually ban it. But the lenders have found loopholes in some cases and are working their way back in.

AH013

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Re: 116% APR, what a deal!
« Reply #10 on: August 17, 2016, 09:07:51 AM »
What the hell, that's over $40k in payments on a $5k loan?!?!!  How the fuck is this a thing!?!?!?

It was even worse.  The loan amount doesn't even tell you how much you actually get.  They would add on steep loan origination fees as if they were a real bank.  So example, you'd "borrow" $1,500, they'd take $500 for their fee and give you your $1,000 proceeds.  Then you get to pay 234% APR on your loan.

slugline

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Re: 116% APR, what a deal!
« Reply #11 on: August 17, 2016, 02:25:14 PM »
Sounds like a product for someone who is truly out of other options. Raiding a retirement account looks like a bargain by comparison.

marty998

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Re: 116% APR, what a deal!
« Reply #12 on: August 17, 2016, 03:30:03 PM »
Sounds like a product for someone who is truly out of other options. Raiding a retirement account looks like a bargain by comparison.

Could be worse. Could be the Mafioso offering the product instead? At least your kneecaps get to remain in tact...

TheGrimSqueaker

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Re: 116% APR, what a deal!
« Reply #13 on: August 17, 2016, 04:21:03 PM »
Sounds like a product for someone who is truly out of other options. Raiding a retirement account looks like a bargain by comparison.

They used to really prey on people who were in the military, or poor people, or people who for whatever reason couldn't have a bank account or rely on traditional loans. Such people don't have retirement accounts, but they often have cars. These cars are often on the cheap side, bought with cash, or else received as a gift or inheritance.

The new trend these days is not a short-term payday loan or a loan secured by a postdated check. For that kind of loan, people pay up because they're afraid of being arrested, charged, and convicted for writing a bad check. (Lots of people have that on their criminal record, for just this reason.) But the current trend is called a "title loan". It's secured with the title to the family vehicle. The interest rates are just as extortionate, and there are fees on top of everything, but if you want to keep working and feeding your kids, you keep paying.

There's an entire sub-economy of people for whom services like this make sense. Payday lenders, scrap metal dealers, consignment sellers, pawnshops, and rent-to-own stores are the places where the underground economy and the mainstream one intersect. The owners of these businesses tend to be extremely well connected in terms of local politics. There's more, but it makes me boiling mad.

human

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Re: 116% APR, what a deal!
« Reply #14 on: August 17, 2016, 08:23:26 PM »
I bet the old school mafia gives people a better deal than these loans, only problem is if you are late on too many payments . . .

Dezrah

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Re: 116% APR, what a deal!
« Reply #15 on: August 18, 2016, 07:37:14 AM »
Radical Personal Finance had a podcast where he talked about alternative banking measures.  There are parts of the world where people really can't get loans at reasonable rates but they still need large chunks of money from time to time.

In Haiti there is a system called the sol (sp?).  Basically every month a group of individuals will all contribute to a pool of money and one of them gets to use the money that month.  So every month you pay $100 and then one month a year you have $1200 for that larger project.

Why not just save for 12 months?  Frankly it's because someone really needs that money so hoarding it for yourself is not socially acceptable.  Plus banks are unreliable and it could be stolen if you just stash it under a mattress.

Obviously this only works for stable, reputable, conscientious persons anyway, so probably not the same people who are likely to take out a tribal loan.

BTDretire

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Re: 116% APR, what a deal!
« Reply #16 on: August 18, 2016, 08:43:57 AM »
 If you find it hard to live on what you earn,
just think how hard it's going to be when you're
paying interest too!

forummm

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Re: 116% APR, what a deal!
« Reply #17 on: August 18, 2016, 10:47:50 AM »
Radical Personal Finance had a podcast where he talked about alternative banking measures.  There are parts of the world where people really can't get loans at reasonable rates but they still need large chunks of money from time to time.

In Haiti there is a system called the sol (sp?).  Basically every month a group of individuals will all contribute to a pool of money and one of them gets to use the money that month.  So every month you pay $100 and then one month a year you have $1200 for that larger project.

Why not just save for 12 months?  Frankly it's because someone really needs that money so hoarding it for yourself is not socially acceptable.  Plus banks are unreliable and it could be stolen if you just stash it under a mattress.

Obviously this only works for stable, reputable, conscientious persons anyway, so probably not the same people who are likely to take out a tribal loan.

I think they are often called savings clubs.

TexasRunner

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Re: 116% APR, what a deal!
« Reply #18 on: August 18, 2016, 11:55:33 AM »
ptf.

TheGrimSqueaker

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Re: 116% APR, what a deal!
« Reply #19 on: August 18, 2016, 12:03:57 PM »
Radical Personal Finance had a podcast where he talked about alternative banking measures.  There are parts of the world where people really can't get loans at reasonable rates but they still need large chunks of money from time to time.

In Haiti there is a system called the sol (sp?).  Basically every month a group of individuals will all contribute to a pool of money and one of them gets to use the money that month.  So every month you pay $100 and then one month a year you have $1200 for that larger project.

Why not just save for 12 months?  Frankly it's because someone really needs that money so hoarding it for yourself is not socially acceptable.  Plus banks are unreliable and it could be stolen if you just stash it under a mattress.

Obviously this only works for stable, reputable, conscientious persons anyway, so probably not the same people who are likely to take out a tribal loan.

I think they are often called savings clubs.

I had a Taiwanese friend who described the same thing and said it was common in China and in Chinese communities elsewhere in the world. It was intended to provide "enough money to do something with" for each person who received the lump sum.

Initially I wasn't a fan of the idea for two reasons. First, the last person in the rotation loses out on compound interest waiting for their turn. Second, if the first few people who get their payouts drop out of the rotation early or skip a few months later on due to shortage of funds, obviously everyone else just got screwed over. If that happens, the only way they can break even is by recruiting new people and paying the screw-over forward, which is also not good for friendship. So I wasn't interested in starting that kind of group myself and turned the opportunity down. Maybe it comes down to whether or not your friends are more reliable than your other banking options. (I didn't think mine were.)

It turns out that something like this can work in an established community where everybody involved has known and trusted everyone else for a long time, and where nobody is going anywhere and people have more incentive to stick around and contribute after a payout than they have to take the money and run. That requires a pretty solid social group.

There's a variation on this concept, called a "gifting circle", and it's a type of Ponzi scheme. (It kind of picks my butt that people are verbing out the word "gift" these days, and when I consider it's a bunch of frauds doing it in this case, it's even more vexing). Here's a simplified version. A handful of people start the monthly pool, and they're at the head of the line. Let's call it Tier 1. They continue to receive the pooled money each month, circulating amongst themselves, but the money they receive is given not just by Tier 1 people (who aren't necessarily chipping in), but also by people in Tier 2. If a Tier 2 person has brought in at least two other people, she (this nonsense is often marketed to women) can move up to Tier 1. Otherwise she just participates in the giving. Once this happens a couple of times, the new Tier 1 people become true believers who are more effective in generating new Tier 2 joiners than anyone else. Once those people's social network is maxed out, the original Tier 1 people drop out. Eventually the mini-pyramid collapses. It's illegal, and it's mathematically impossible for every Tier 2 joiner to make all their money back. Some versions are more complicated and have more tiers.

frugalnacho

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Re: 116% APR, what a deal!
« Reply #20 on: August 18, 2016, 12:18:42 PM »
That actress is hot.  Would let her smoke my peace pipe.

http://www.imdb.com/name/nm3370175/

nobodyspecial

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Re: 116% APR, what a deal!
« Reply #21 on: August 21, 2016, 02:04:44 PM »
It turns out that something like this can work in an established community where everybody involved has known and trusted everyone else for a long time, and where nobody is going anywhere and people have more incentive to stick around and contribute after a payout than they have to take the money and run. That requires a pretty solid social group.
It worked very well for nearly 200years, they were called "friendly societies". Then activist investors bought in and forced a vote on going public - because everybody would score a $$$ windfall.
Then they had shareholders to answer to, but they were effectively banks so they could do derivatives and credit default swaps, and they could end up $Bn underwater in 2008 and be bailed out by the government.

And so the cycle of nature continues...