Cheap Payday Advances - A Hero Never Lies
The hardest part about being the Payday Loan Hero is dispelling al the hopeful myths people believe true about today's payday advances, and one of the deepest imbedded beliefs is that if these loans were more affordable, things would be a whole lot better. On the surface, cheap payday advances charging say $50 per $100 borrowed would indeed cost a it less than the average $20 per $100. 5%, 20% - there is a difference, but it turns out increased affordability doesn't do squat.
Bigger fish than cheap payday advances
The problem with payday cash advances isn't that the lenders charge too much, its that they charge too much too fast. here is what the Hero means:
- Imagine you applied for two $500 advances simultaneously - one charging $5 per $100 the other charging $20. Both are delivered in the exact same amount of time, both repayments are due at the exact same moment.
- Now imagine you earn an annual salary of around $30k - not too shabby, a teacher in Arizona maybe. You have a mortgage, car payments, a couple kids, whatever, basically you are already stretched to your limit given the high cost of everything today and your take home pay of about $1,000 every paycheck.
- Do you think it will make that much of a difference if you have to give up $600 vs. $525 for those cheap payday advances?
The Hero says no, even with increased affordability you will still have only $475 to last you the two weeks until your next paycheck. Instead of affordability, you would have benefited from a slower repayment term, a 20% charge would be fine if you had a full month or even two to repay the advance. Even at a repayment rate of two month the APR for a $20 per $100 advance would be about 120% - cheap payday advances when compared to today's opportunities, but still more expensive than anything in the rest of finance.