Bloomberg Publishes Piece on Booming Predatory Loan Business -- Here's Our Comparison
We are a few weeks late in catching this article, but, back in May, Bloomberg ran an article on the business of predatory lending called Charging 589% Interest in the Pandemic Is a Booming Business.
Author Davide Scigliuzzo and artist Christopher Cannon do a great job covering the record profits that predatory lenders have seen since the pandemic, but especially illustrative is their interactive infographic showing how one Kimberly Richardson saw a predatory lender fleece her of thousands of dollars before she declared bankruptcy.
Richardson initially borrowed the $1,500 in October of 2019. Between the lender’s encouragement to continue drawing on her credit line and an annualized percentage rate (APR) of 276% — which accounted for nearly $7,500 in accrued interest and fees — Richardson paid nearly $10,000 to the lender by April of 2021 before declaring bankruptcy.
Richardson’s debt to the predatory lender increased over this time period to almost $3,500, even though within 6 months (by May of 2020) she had already paid more than she initially borrowed.
It can be difficult to show just how pernicious predatory loans are, and so we commend Scigliuzzo and Cannon for their work.
Though it is not quite as impressive as their infographic, we have also put together a basic comparison showing what paying off $500 looks like in our Tennessee communities. We also have developed a Comparo Calculator that can show comparisons of loans for different amounts over different terms.
Cost of Paying off $500 in One Year
If you have a few minutes and would like to read through the Bloomberg article, you can do so here.
As some of the pandemic’s consequences become clearer for our lower income neighbors and for those who rely on ‘alternative’ finance,, at BetterFi we plan to continue creating a sustainable, quasi-market solution to the specter of predatory lending.
Thank you for your support.