Tuesday, February 7, 2012
Getting Scalped from E-Z Loans
Ever notice when you're up late at night watching TV, all the various "pay day" quickie loan commercials that pop up, all guaranteeing you E-Z money? One in particular I saw late tonight stood out because it was the first time I had seen Native Americans offer a service that rooks people with offensively high interest loans-- usually its Caucasian owned companies using black spokespeople like Montell Williams to present their services to their targeted audience in inner cities.
The company is called Western Sky Financial. Its a real company. According to the TV ad, it is a "100% Native American-owned business operating on a Native American Reservation" and the spokesman, also Native American says that you can receive up to $5,000 in just one day and with "NO Collateral!"
Isn't that wonderful?
Underneath in small print on the TV ad, it says "the APR for a typical loan of $5,000 is 116.73% with 84 monthly payments of $486.58."
Let us say someone was desperate enough to borrow $5k from this company and due to severe financial hardship, could only pay back the minimum payment of $486.58, how much would that person have paid out by the time the entirety of the loan was paid off?
$486.58 x 84mths (7 years) = $40,872.72 ... on a $5,000 loan!
Now for perspective, let's say you cashed a credit card cash advance check for $5,000 and the interest was 30%, (which is extremely high for a credit card but obviously much less compared to the 116.73% payday loan), and you needed 84 months, to pay off, how much would your total payments come to?
Using an amortization calculator, its easy to figure:
$142.96/mo x 84mths (7 years) = $12,009.05
That is a difference of $28,863.67 in profit by the cash loan company taking unfair advantage of a person in hardship's bad credit and/or desperate financial situation.
Let's take it one step further-- a person with good credit using a credit card in good standing will have an APR around 12.99%. So, how do the numbers compute on a $5,000 loan paid off over 7 years based on that rate?
$90.93/mo x 84mths (7 years) = $7,638.34
Amazing.. Disgusting & Amazing... The difference spent over 7 years between the person with good credit and the person desperate enough to need a quickie loan is $33,234.38!!
That is enough $$ to buy a new car. And the difference in monthly payment between the two extremes comes to $395.65 which is enough money to pay for a month of food.
In a way, this ties in to Greece because this is the type of loan the IMF, EU and ECB have been providing to Greece which they're so adamant on collecting, and which the leadership is too stupid or corrupt i.e. backdoor payoffs by the troika, to default on.
Whether an individual, a family or a nation, if you are poor and desperate, you really don't stand a chance