Loan sense

Posted Tuesday, May. 14, 2013  comments  Print Reprints

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Letter writer Richard Simms wants the Texas House to cap payday lenders at 36 percent APR. (See: “Payday lending,” May 5) That would eliminate those lenders as the source of last resort.

At 36 percent, a lender would earn “profit” of 10 cents per day per $100 loaned, or $1.40 for a $100 high-risk loan for 14 days (typical). That’s a business plan doomed for failure.

If an employee earning $10 per hour needs a work vehicle and an immediate $200 repair is needed, a payday loan might make sense. At 500 percent APR, the cost is $1.35 per day per $100 borrowed, or, $38 for 14 days.

The alternative to miss up to 10 days of work might be an $800 loss. It’s a no-brainer to borrow the money.

Most folks can afford a few dollars per day but can’t afford to miss a paycheck. The problem is too many roll the loans over.

To stand with the people of Texas, legislators will pass legislation that facilitates short-term “emergency” lenders, limits the loan maximums and restricts the rollovers. To eliminate a tool for responsible workers because the irresponsible abuse it might be good rhetoric, but it’s ineffective governance.

— Joseph Ansley, Fort Worth

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