PSA: I just found out payday loans charge 400% APR in some states and it made me sick

I was looking up my credit report last night on Credit Karma and stumbled on an article about predatory lending rates. Turns out in states like Texas and South Carolina, payday lenders can legally charge up to 400% APR or more. I had to read that twice. Thats $40 in fees for every $100 borrowed over two weeks. The average person who takes one of these loans ends up rolling it over 8 times, paying way more than the original amount. I knew those places were bad but I didnt realize it was that bad. If you or someone you know is considering one of these, please look into credit unions or even a small personal loan from a bank first. Has anyone here actually used one and found a way out?

2 comments

2 Comments

zarap1423h agoTop Commenter

One angle I haven't seen anyone bring up is how these loans specifically exploit people who don't have a social safety net. In my experience, a lot of folks turn to payday loans because they're unbanked or underbanked, meaning they don't have a regular checking account or access to a credit union in the first place. I know someone who used one to cover a car repair after their bank denied them a small loan because of a low credit score. They ended up paying 300% APR in a state where it's capped still, and it took them six months to pay off a $500 loan because of the rollovers. Your mileage may vary, but the real problem is the system fails people before they even walk into those places.

michael_jones1d ago

Man that is absolutely disgusting, I had no idea it was that extreme either! Seriously, $40 for every $100 borrowed in two weeks is basically legalized robbery. Glad you're spreading the word, people need to know about credit unions as a real option.