Tuesday, November 11, 2014

Anyone for a loan?

Our household receives credit offers on a daily basis.  If I am in the process of moving a low interest credit card debt which is about to have a rate change to a new low interest card, I will open some, but mostly I toss them in the trash.  Today, I happened to open one as it was from a local "lending" agency that I did not recognize, and I wondered at the offer.

Imagine my surprise when I read the following;

                                                      You could borrow $4250
                  for just $156.93 per month for 42 months at 26.77% APR

The advert included other phrases such as "Get the money you need at a payment you can afford", and "A better alternative.  Unlike payday loans, you'll have months (not weeks) to pay back your loan".

Now, there was a caution that "this is not a guaranteed offer".  I assume that only the best of those with the worst credit possible would be approved. 

Still, my mind flew in all sorts of directions when I read this mailing.  I seethed, I boiled, I threw it in the trash.  Then, I fished it out of the trash and called the number listed.  My call was answered by the person named on the letter.  I read the offer to him, emphasizing the 26.77 % APR.  He began to explain that it must have been a corporate created offer, but, to be honest, I didn't let him finish his explanation.  I told him that his offer was predatory, should be illegal and that if I had the power I would close his business tomorrow, then I hung up.

I know, not very nice but at a time when big banks are able to borrow money to lend America at historically low rates, less than 1%, I was outraged.  The fact that the tag line for the company is "lending made personal", makes it all the more outrageous.  After all, what could be more personal that paying almost $7000 for a loan of $4250?? 

Well, you might say, these loans are for people with bad credit and a history of not repaying their debts whereas the big banks have collateral and always pay back their debts.  I guess so, unless one recalls the great economic meltdown of 2008 when so many of the big financial companies needed taxpayer money to keep them afloat!

I am not sure when loan sharking became legal, but I imagine that it coincided with the ability of the biggest moneyed interests to write the laws of America (through groups like ALEC) so that these type of predatory loan practices are condoned.  Crazily, it is these very kind of lending companies doling out money at ridiculous interest rates who will keep those with the least resources toiling at the bottom of the economic ladder, or default sending ripples up and through the rest of the financial community as, I am sure, these scum sucking lending companies are getting their money through a more legitimate lender; or both. 

I will be saving this offer, and, once the new Pennsylvania legislature takes office, sending a copy to my state and local rep asking them to create legislation limiting consumer interest rate offers in my state to a rate that less predatory, perhaps even Christian. 

Finally, now that my son is 6 months out of college, it is time for our family, my son on his own, and my wife and I, to begin repayment of his college loans.  My son has the typical Stafford Subsidized and Unsubsidized loans, ranging in interest rates from middle 3% to 6%.  I won't say how much my wife and I borrowed but it would have purchased a really nice car.  (The kind of car we will never buy for ourselves).  You might call us crazy, borrowing on our own to send him to college, but I still believe that a college education is worth the money, despite the fact that college tuition prices are ridiculous and that if they continue to rise, the next generation of middle class Americans may not be able to send their kids to college.  What irks me, is not the debt itself, but the fact that the Parent Plus interest rate is 7.9%.  Compare that to mortgage rates in the high 2 to upper 3% range, and car loans in the 0-2% range, and it is clear where our priorities lie.  And, by the way, for the Parent Plus loans, the interest began accumulating from the day the money was borrowed. 

If I were king, I would consider education loans an investment in the future, and charge little or no interest.  So, again, once the new federal legislators convene next January, I will be contacting my representative and senator to fashion legislation that delays interest rate accumulation for all loans for education until graduation or departure from college, and to tie interest rates to the prevalent lending rates of the day, perhaps the same rates that big banks get. 

If, you feel similarly, please act upon your feelings and contact your state and federal representatives. And, in the meantime, I will keep an ear out for comments from our elected public servants when discussing education, paying for education, and funding education. 

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