APR or Interest Rate
Short-term lenders are required by law to present their products in terms of an Annual Percentage Yield, I suppose, to dissuade individuals from seeing it as a desireable option. The APR on a short-term loan is a scenario in which a customer would have to take out a loan every payday consecutively for an entire year. So what’s wrong with this picture? Well, for starters, someone taking out a cash advance every payday for an entire year for any reason is a rarity since they are for immediate and minimal use. The second dilemma is that the same lawmakers who are comfortable with these institutions having to quote their services as APR, bash them for supporting such usury and predatory lending conditions. Futhermore, there are several states that do not even allow for repeated, discretionary use of cash advances and limit the number and amount taken out per designated term. I believe that short-term lenders wouldn’t be such a target if they were given the opportunity to present their products and services in their true interest form rather than an APR, as the typical interest rate is between 15-20%. There is little debate as to whether or not short-term loans have a place in today’s economic atmosphere so what is the best solution to the media-created problem of APR?
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