Wow. While watching TV the other night, I saw an ad for a lending service that promised to put $2500 in my checking account overnight. There’s no collateral required, and no fees for early payoff.
Sounds good. Where do I sign up? Hmmm. On second thought, maybe we should check out the terms first.
Upon arrival at their website, I saw the following:
Application time less than five minutes! Not a payday loan!
Oh good, it’s not a payday loan. I’ve heard that those have high rates, so it’s probably best to avoid them. This, on the other hand… Well…
The woman in the commercial admitted that “the money is expensive, ” but assured me that I can minimize my costs by paying it back as fast as possible. And besides, it’s not a payday loan, so it can’t be that bad. Can it?
Let’s take a look at the rates:
You can get a $2600 loan, which works out to $2525 after deducting the $75 “loan fee, ” in return for just 36 monthly low monthly payments of $298.94. For the math impaired, that $2525 loan will cost you a total of $10761.84 (plus the $75 fee). That works out to an APR of 139.34%.
If you don’t need quite as much money, you can get a $1500 loan, which works out to $1000 after deducting the $500 “loan fee, ” in return for just 24 low monthly payments of $166.95. In other words, that $1000 loan will cost you $4006.80 (plus the $500 fee). That works out to an APR of 194.70%.
But look on the bright side… At least it’s not a payday loan.
While I realize that there are extreme instances in which a short term, extremely high interest loan is preferable to the alternatives, it pains me to see these sorts of things being advertised on late night television knowing full well that their switchboards are lighting up. If they weren’t, they wouldn’t keep running the ads.