Payday math
January 11, 2010 | Virginia, industry, positive media coverage | Comments (0)From a Center for Consumer Freedom letter in the Virginian Pilot:
Gov. Tim Kaine’s approach to payday loans (‘Short-term loan program shows promise,’ Hampton Roads , Jan. 2) does not show an understanding of how these short-term loans actually work. In addition, Kaine’s plan does not provide an adequate solution to consumers’ increasing demand for credit options.
Kaine misleads readers when explaining payday loans. A typical short-term payday loan would have to be rolled over 26 times (every two weeks for a year) to achieve the excessive interest rate he claims. Short-term payday loans are meant to be just that, short-term.
That’s the key point. Customers don’t pay an annual interest rate because it’s a tw0-week loan, not an annual loan.
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