Payday Loans

Payday loans are high-interest short-term loans, usually over a period of two weeks. One recurring political question is whether or not interest rates on such loans should be capped. Roughly speaking, those in favor of caps want to protect consumers from potentially harmful loans, while those against caps want to let the free market determine what the rate should be.

1.) Watch the video and read the article below.

Oliver, J. (2014). Predatory lending: Last week tonight with John Oliver. HBO.

Retrieved from https://youtu.be/PDylgzybWAw

 

Holland, J. (2016). Rapid City payday lender stops making loans due to new lower interest rates. Rapid City Journal.

2.) Post one initial response of at least 150 words but not more than 350 words responding to the following.

 

Do you think there should be interest rate caps on payday loans or not? Defend your answer.
Determine the interest that would be charged on a two-week $300 payday loan if the interest rate is 520%, and the interest is compounded at the end of the two weeks. Explain how you came to your answer.

Suppose a friend or family asked you how it could be possible that an annual interest rate is higher than 100%. Write out an explanation of what you might say to them.

 

 

 

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