Repair Your Credit | The Media’s APR Shell Game (Pt. 5)

What’s in a 391 APR?

Juliet:

“What’s in a name? That which we call a rose
By any other name would smell as sweet.”

Romeo and Juliet (II, ii, 1-2)

(CLICK HERE if you missed part four of this “Repair Your Credit” article)

No matter how many times the media attempts to mislead the public with their claims that cash advance lenders charge exorbitant annual interest rates, the truth is that annual percentage rates aren’t the right unit of measure to inform the public.

Only accuracy smells so sweet, so let’s be accurate: the vast majority of short term loans are two-week loans that charge anywhere from $15 to $30 per $100 loaned. That’s a 15 to 30 percent surcharge (surcharge being the true name) for your loan, depending upon the lender you select. The APR measurement is used because it is mandated by the Truth in Lending Act that all small consumer loans publish such a rate. Nobody ever accused the government of using a shovel to dig a hole when a bunker buster works just as well for them. Accuracy and efficiency are an afterthought at best…

Still not convinced?

Let’s try this another way. Lobbyists against the online payday loan industry exaggerate the truth in order to win over public opinion. The biggest exaggeration about short terms is -  you guessed it – the supposed annual percentage rate (APR) charged by lenders. The rates quoted by opponents of the payday loan industry are not necessarily false, mind you.

If a two-week short term loan were computed out over an entire year, the resulting annual percentage rate would in fact be anywhere from 391 percent or more. However, this type of mathematical trick and skirting of the truth is far from helpful to either the consumer or an honest industry that has just as much right to operate in the field of consumer finance than any other that adheres to federal and state laws.

Still don’t believe? Let’s take a CLOSER LOOK at the opposition’s argument…