As a discerning consumer, you might call a loan with repayment terms mandating an annual interest rate of 500 percent a lot of things.
It is unlikely that you would call it, as does one spokesperson for a large lending company, a “viable credit option.”
According to a media analysis of payday loans, things generally work out as follows regarding such financial instruments.
First, a consumer in dire need of instant cash approaches such a lender (note: there is certainly no scarcity of such lenders; they dot the landscape in every state, including in Mississippi). Typically, a payday loan is needed to cover expenses of a few hundred dollars at most. Borrowers customarily hand over a check marked with a future date, in an amount that covers both principal and a fee.
That certainly sounds simple. The complexity -- for many consumers, the unraveling -- comes when, as that future date approaches, the borrower realizes that he or she can’t make the payment.