Re: Re: Re: Re: Re: Re: Re: Re: Re: MSN Your money boards That's not at all what I'm saying. Acute financial need does not justify extraordinary interest rates. These payday loan places exist for people who can't get credit elsewhere. The person who gets a $200 loan for two weeks paying a $15 service fee is someone who can't get a credit card that would allow him to do a cash advance or just charge the purchase. It's credit without a credit check. In the lending industry, it's called a hard money loan. You don't have to demonstrate any qualifications except the most basic, you're breathing and you do have an income. It's not the acute financial need of the borrower that justifies the high interest rates, it's the acute financial risk of the lender that does. Object to the very source of ethical though for western civilization? No, not me. It's easy to say that until you go into business for yourself and see the costs involved. Employee payroll, benefits, utilities, taxes, rent...add that to the cost of collecting bad debt and the write offs to the defaulted loans and the total is extraordinary. Have you ever heard of a company called the Associates? They were a finance company with a reputation of lending money to people nobody else would touch. Among other types of loans, they did mortgages at rates from 12% to 18%. As a mortgage banker, I sometimes choke when I talk to their former customers. I have a customer right now who bought her home with the Associates paying 18% on a $40k loan. The thing is that at the time, they were the only ones to offer her financing, nobody else would touch her. Yes the rate was high, but it got her into that house with a monthly payment that wasn't any higher than she would have paid for rent. Today she's talking to me about buying a new home. This time the price range will be around $100k, and she has about $25k in equity on the home she's in. The thing is, the Associates have gone out of business. Charging the highest interest rates of any of their competitors and getting lots of customers, they still wern't able to make enough money to keep going. The default rate on their loans was just too high. It's easy to look at one specific customer and think, "wow, they made a lot of money from him" and assume that if they have a thousand customers that they're making a thousand times that money, but that doesn't count the customers where they lose money. Sub-prime lenders go out of business all the time.
