The 182 Percent Loan: How Installment Lenders Put Borrowers In A World Of Hurt
Monday, May 13, 2013 - 1:41 PM
Installment loans have been around for decades. While payday loans are usually due in a matter of weeks, installment loans get paid back in installments over time — a few months to a few years. Both types of loans are marketed to the same low-income consumers, and both can trap borrowers in a cycle of recurring, expensive loans.
Installment loans can be deceptively expensive. World and its competitors push customers to renew their loans over and over again, transforming what the industry touts as a safe, responsible way to pay down debt into a kind of credit card with sky-high annual rates, sometimes more than 200 percent.
And when state laws force the companies to charge lower rates, they often sell borrowers unnecessary insurance products that rarely provide any benefit to the consumer but can effectively double the loan's annual percentage rate.