To The Daily: I feel compelled to respond after reading Kathy Rice's March 6 letter to the editor "An affordable credit option." In her letter, Rice, division director of operations, Advance America, defends "payday lenders and short-term lending's important role in many families." She states her company provides an "affordable credit option" and does so with a "flat, reasonably priced fee that does not compound interest — whether a customer repays their loan in three days or 30 days." She goes on to say clients pay a $17 fee per $100 borrowed. She also says that 90 percent of her company's customers pay their loans on time.
If you do the math, you'll see this company can lend that same $100 on a three-day loan 121.67 times per year. On a 30-day loan, they can re-lend that same $100 12.16 times per year. So, if they lend it every three days, the annual fees are $2,068.33 on that $100 and if they get paid on time, 90 percent of the time, then their annual yield is $1,861.50 on a $100 loan. If you do the same math for a 30-day loan, their yield is $186.15 on $100 loaned out every 30 days all year. I doubt loan sharks or bookies make that kind of return on each $100.
Nicholas B. Roth
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