Sure, we could find each of these risky situations and try to regulate them, but you won't even know of them because most people will never get towed. It's better to improve access to credit.
The guy could get $100 the next day, but not $100+storage-fee/day. It's like $70/day. Any loan that goes between 0% per day and 70% per day simple interest would have been a net win for this guy.
Obviously, having eavesdropped on the whole thing, I paid it as I was leaving but I think perhaps those of us with easy cash liquidity should perhaps build some intuition on what kinds of situations cause people to take on onerous credit.
EDIT: Oh, I recalled a detail I'd forgotten when first relating the tale. He wanted to go get his phone from the van so he could call for help but they wouldn't let you in the yard without paying to release. I imagine he was going to have a damned hard time asking for help without the phone.
"The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money.
Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles.
But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that'd still be keeping his feet dry in ten years' time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.
This was the Captain Samuel Vimes 'Boots' theory of socioeconomic unfairness."
I went through my fair share of Walmart black no slip shoes before moving into tech. I hope financial hardship is in your future as well as your past. Maybe you'll figure it out the second time around.
Wow.. I had to check your post history to make sure I didn’t misinterpret your words. There was a clear pattern. You seem smart, maybe you can find it too.
My dear internet stranger and fellow HNer: I hope you find more love in your life and the ability to see it in, and give it to others. All the best to you!
Of course the real problem is many jobs don't pay enough.
In fact not getting paid enough - and therefore being unable to budget - is considered evidence of poor character, while not paying enough is considered evidence of enlightened and mature rationality.
It's quite a strange view of the world.
so you'd be in favor of payday loans if they were limited to n times per year?
>If you haven't been able to save $100 a month for five months, you just won't be able to save five times as much, let's be realistic.
what about people who have the free cash flow, but can't save for various reasons? eg. friends/family asking for money, poor self control, etc.?
Unbounded APR and "letting the market figure it out" is not the solution.
BTW, right now US treasury bonds have a higher 10y yield than Italy.
Would'nt it be better to rack up a $500 loan and then try to pay $100 per month so that it can be paid off in 6-9 months - even with 36% interest ?
Don't most metro areas have public transit? Perhaps buses are not the most comfortable or convenient, but they do exist, and for good reason.
Actual democracy is an extreme negative, not a positive approach to organizing society.
You can claim the majority would benefit from eating the wealth of Sergey Brin and Larry Page at this point, they no longer operate Google, they're just ~50 year olds sitting on $200 billion in Google shares, piddling around until the day they die. So why not let society benefit sooner rather than later by consuming their wealth to its (supposed) benefit, divvy up their wealth to the poorest 51%.
You can invent a huge number of scenarios for doing things like that, where society supposedly is better off if we violate the property rights of some minority group. Why shouldn't some minority of people be allowed to lend at 43% interest if there are takers at that rate? Because you say so? Why shouldn't their property rights be respected - the property right to lend their money out at the rates they can command - and why should the majority get to arbitrarily restrict their property rights? It sets up an obvious exploitation situation, which is always the case in democracy, where the majority can endlessly torture, exploit and abuse the minority.
It would very clearly be better for the top 51% (far more than that actually) - the majority of society - if the economic bottom 10% did not exist (a group that rarely holds a job, has vast health & drug addiction problems, rarely pays taxes into the system, rarely contributes much of anything; and in fact that's true in nearly all welfare states, including the US). So they should all be gotten rid of, is that right? Democracy in action. The tax paying majority is sick and tired of carrying the never-tax-paying economic segments at the bottom, time to get rid of them, for the benefit of "society" (aka the majority power herd).
For the same reasons we have regulations and standards in construction, transportation, etc. Because we know that uninspected cars will leads to death and injury on the roads. So laws and regulations are there to reduce selling and using blatantly unsafe vehicles.
https://www.pewtrusts.org/~/media/legacy/uploadedfiles/pcs_a...
Those seem like damn good odds for something that is necessarily a zero sum.
I would expect that as you get lower down (say bottom 10) it becomes even more volatile since the wealth needed to get out gets even lower.
And they happily drive off the lot with a $80k car loan at 36%. People are, pardon my french, dumb as shit when it comes to car purchases. They are very happy to lose a guaranteed $10k/year in deprecation, so they won't get hit by a $2000 surprise bill.
While I was a student over the span of 5 years I had spent to the mechanic more than what I had paid the dealer for my 10 yo used car. Without the help of my parents I am not sure how I would be able to spit enough money to pay all of these bills.
So yes paying 400 per month for 7 years with high interest is a better deal that getting a car that you can afford with cash.
Well, that's your problem right there. Unless you have routine access to spending opportunities that yield more than 36% in yearly returns, which I'm going to assume is pretty unlikely.
What you do is you starve a day or two and sell your food bank food. Everyone is capable of generating income while depleting from stores.
Are you under the impression that nobody ever uses credit facilities with high interest without spiraling into bankruptcy?
Borrowing $500 for one month and paying $15 in interest would be completely worth it and beneficial to the borrower. That's what 36% annualized interest would look like for a single month.
Do people get in trouble with debt? Yes. And that's why we have bankruptcy. But not everyone gets in trouble with debt. I don't think it's fair to make it unavailable to everyone to protect those that fall into arrears -- because, again, that's what bankruptcy is for.