No Competition
The face of payday loans in New Hampshire is changing, and consumers in need are in a position to reap the benefits. But Advance America is eager to point out that their new product is not payday loans, but a “Credit Line Product.” Whatever you call it, it is yet another innovation from the cash advance industry that banks and credit unions simply cannot match.
Coverage by the Concord Monitor spends a great deal of time reminding the public that payday loan businesses are going to be capped at 36 percent APR on January 1, 2009, and that the cap will effectively banish an industry with “outrageous” APRs that are “typically at 500 percent.” No matter that the payday lending industry provided jobs to 200 New Hampshire residents, per the reporter’s findings.
Once more, with feeling: payday loans aren’t annual loans
Here are comparable options to taking out payday loans, with their APRs attached for your consideration. If this isn’t well-known by now, it should be:
$100 payday advance with a $15 fee = 391% APR (if it were an annual loan, which it isn’t)
$100 bounced check with $54 NSF/merchant fees = 1,409% APR
$100 credit card balance with a $37 late fee = 965% APR
$100 utility bill with $46 late/reconnect fees = 1,203% APR
Yet journalists rarely display an understanding of this
What the Monitor reporter seizes upon is that Advance America was prompted to offer this new, open-ended small loan product by the potential loss of their previous payday loan business. However, they are not simply rearranging the deck chairs in order to stay alive, they’re positioning themselves to continue to prosper. Oh, and they’re helping consumers in the process. It would be a mutually beneficial arrangement.
While it is true that the new product would be free of the new restrictions that keep no fax payday loans under a 36 percent APR cap, the APR from the resulting “Credit Line Product” would be agreed upon by both lender and consumer before a contract is made.
It is not a payday loan
Advance America wants to provide consumers with a “Credit Line Product,” which bears no small similarity to a credit card for those with less than perfect credit. It would be a line of credit, ranging from $500 to $700, that consumers could access via withdrawal advances $10 increments.
Here’s a great feature: if the customer pays off their debt before month’s end, no charges are added. If a rollover occurs, Advance America charges an APR of 365 or 465 percent, with the former rate going to those who elect to allow the company to deduct payment directly from their bank accounts.
It is freedom of choice for payday loan customers
According to Advance America, the company has no plans to shut down any of its 24 branches in New Hampshire. With something like the Credit Line Product in their corner (which would work for consumers and those who distribute payday loans, they won’t have to. Consumers will continue to have access to short-term cash relief during financial emergencies.
I continue to be mystified as to how it is that state legislatures, and also the media, keep thinking that somehow a $15 – $25 fee per $100 taken out that is paid off in under a month qualifies as APR, and somehow as unreasonable or predatory. If the loan is paid back on time, then that’s only 15 to 25% interest, far more reasonable than any credit card.
People are always talking about the APR on payday loans, and whoever thought of classifying payday loans with APR’s wasn’t that smart. No one takes a year to payoff a payday loan, that’s why its called a PAYDAY loan, because you pay it off on the next PAYDAY.
i’m in need of such services and will write back on how it went. it goes into process this frday the 2nd so i’ll try it out
THE reason why people consider it APR on Payday Loans is that the majority of people don’t get a pay day loan and pay it off the next payday. The majority of people come in every payday and get the same money and just pay off the fee.