Many Floridians and other Americans likely have no idea what some consumers are dealing with when it comes to paying back loans.
Many people chafe under a double-digit credit card interest rate. Thousands of persons across the country who have been unable to take advantage of home refinancing are also bitter about that reality, even if it means that they are currently paying 5-6 percent interest on their mortgage payments.
Consider this: Borrowers who owe money they received through so-called “payday loans” face interest rates that make 15 percent look like a steal.
In fact, it is hard to find a statistic more shocking than this one, which comes courtesy of the Milken Institute, a California-based economic think tank: Annual percentage rates applying to payday loans are more than 570 percent in select states. In fact, the institute cites a low of 196 percent for borrowers in Minnesota.
Payday loans are either a valuable service or an outright evil, depending on who is being asked. Consumers of such loans are typically strapped for cash, often perpetually, and need a quick loan to pay for essentials, such as food and rent.
That can come back to bite them, and frequently does. Although the nonprofit group Pew Charitable Trusts states that payday loans average around $375, information provided by the Milken Institute indicates that it generally costs a borrower about $800 to pay back even a $300 loan.
That is a sad irony, with people needing temporary help ending up scrambling for debt relief, with some of them even taking out subsequent payday loans simply to pay the interest owed on an earlier loan.
Statistical evidence indicates that many Americans are living on a financial cliff, with the Milken Institute stating that about 12 million consumers across the country borrow approximately $50 billion from payday lenders annually.
Source: Business Insider, “6 outrageous facts that show how payday lenders screw consumers,” Hayley Peterson, Oct. 25, 2013