Saturday, July 7, 2007

Somebody 'splain this to me

Just saw a commercial for one of those loan places. Gary Coleman was the celebrity spokesperson.

The APR is 99.25%.

That means that you borrow 2500 bucks and pay back 10,000 over 3 1/2 years.

Or, you could borrow $5000 and pay back $21,500 over 7 years. That's only 60% APR.

Not that I would take advice from Gary Coleman.

15 comments:

William the Coroner said...

Monkeygirl--it's a tax on the math challenged. Besides, Gary is probably working off his loan in work-servitude.

john said...

you omitted the best part. The bank can changes its rates at any time.

HIBGIA said...

wow. just wow. I knew those "anyone gets approved" places killed you on the APR, but that's insanity.

ER Tech Dude said...
This comment has been removed by the author.
ER Tech Dude said...

he APR is the total Annual Percentage Rate you'll pay each year over the life of the loan, which includes all fees (junk) you are required to pay in order to get the loan. Most people whether buying a car or financing a home roll the fees into the loan itself.

That being said federal regulatory guidelines on a home loan prevent the fees from being over 4.99% of the amount of the loan. Those fees include origination, credit report, title, escrow, broker rebate (the money a broker receives for sending your loan to a lender), and lender fees.

I'm not sure the Personal Money Lenders as they're called are as highly regulated as the mortgage industry.

Did I happen to mention I also own a mortgage company?

Nurse K, Generic ER Nurse said...

Our state forbids companies like this. There are things like "auto title loans" that are meant to be short-term high-interest loans where the collateral is your car. These things fall under the category of "predatory lending" because usually the fees are so high (like $200) that no one can pay off their $500 loan and their car is repo'd.

Babs RN said...

Holy Cow - banks getting into the Loan Sharking business.

And I loved this: Please be aware that not all applicants will qualify for every loan product or the lowest interest rate for a particular loan product.
So the diff is...what? One or two percentage points? Not a lot of room to breathe there.

Pharmacy God said...

The first time I saw the commercial I hit the rewind on the DVR to make sure I saw the APR correctly.

I guess they need to charge such high interest rates in order to land such a high-profile celebrity spokesman.

Bob said...

er tech dude wrote: That being said federal regulatory guidelines on a home loan prevent the fees from being over 4.99% of the amount of the loan.

Wow. My mortgage rate is 5 3/8%. How do people fall for this schitt?

ER Tech Dude said...

Bob, you're mortgage rate might be 5.375% but your APR is higher. Pull out your Truth-in-Lending statement and look at the box in the upper left hand corner, I'll bet you it's higher than 5.375%.

If you want to see the fees you paid for obtaining the loan, look at your Good Faith Estimate and then you're final HUD-1, I'd bet dollar to donuts the feels are slightly higher on the HUD-1. Not to mention there's some junk fees thrown in there too.

Unfortunately as long as the total of the fees remain below 4.99% it's all legal.

The interest rate and APR are two completely different animals. APR is the total cost of credit to the consumer, expressed as an annual percentage of the amount of credit granted taking into account one time fees.

Sorry MG didn't mean to take over your post.

Midwest Mom said...

This crap isn't legal in my state, and we're trying to put the payday loansharks out of business, too. I know you can't rescue people from their own stupidity, but in cases like this, we can try.

Loving Annie said...

Anyone that clueless is taking a calculated risk of losing one's ass faster that at Vegas....
How to go bankrupt with one phone call. Here's Gary !

DW said...

"Unfortunately as long as the total of the fees remain below 4.99% it's all legal. "

That kills me, 300K+ 15K to get a loan. Interest is up to 7.5 now plus, PMI, home owners ins., the American dream is in hock.

I just paid my house off, I'm thinking I'm going to have to bank about 4k or better a year for the taxes and Ins. The payment was only $800, $200 was for taxes and STUFF.

Mother Jones RN said...

I've got to love loan sharks that buy TV spots. It makes for great entertainment.

Auty said...

I thought it was funny that he said even his family wouldn't give him any money. And then he found this wonderful loan!