Non-profits have entered into the payday loan business. Two weeks ago the New York Times profiled one such business, unfortunately the Times is a non-non-profits, so the article is no longer free. Based on the article description and some other blogs it looks like a non-profit called Goodmoney charges a mere $10 per $100 borrowed per two weeks. Only a 252% interest rate!
As this article from last year in USA Today points out about $5 of the $10 charged goes to defaults. Perhaps the answer can be found in the beginning of the article where credit unions work with customers to give loans at reasonable interest rates 12% per year, but make sure that customers learn to better manage money.
Two finals thoughts. First, I would like to point to bloggingawaydebt. It is one of many personal finance blogs I have been reading over the summer. They do a great job. Second, in the last post my wife commented about how can we trust the data provided by the report I linked in the last post. There are a lot of bogus statistics out there, but their data seems to be provided by the State of Ohio and other reputable sources. So I feel reasonably confident there data is correct (and my wife is reassured also). Interestingly the USA Today article shows last year there were as many pay day loan places as Starbucks and McDonalds.
2 comments:
When I worked for ACORN Minnesota we were exploring alternatives to payday lending. I don't remember the specifics, but there were trial programs (that were for profit) being run that, if I remember correctly, were more like Credit Unions. People could borrow small amounts of money with significantly lower fees than a payday lender, and if they made payments they could then borrow a greater amount. My union (which represents people who make at or below minimum wage) has a deal with a credit union like this. The problem most of our members have is that it is much less convenient than getting a payday loan from one of hundreds of check cashing places across the city.
I think it's great that you're talking about this, and hope you keep exploring alternatives!
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