LETTER TO THE EDITOR: A True Answer to Personal Loans – Bemidji Pioneer
Payday loans are low amount loans due on the borrower’s next payday. In Minnesota, the Minnesota Department of Commerce’s 2020 report showed that the average payday loan size is $380, and the cost of borrowing that amount for two weeks comes in at an abysmal 273% APR.
In Beltrami County, there were 4,109 payday loans averaging $311 with an average annual interest rate of 202%.
This exorbitant interest rate could be ignored if borrowers took out a loan, got out of debt and left satisfied. But that’s not the reality surrounding this predatory lending product.
MDC data shows that the typical payday loan borrower takes out an average of 10 loans a year and is in debt for 20 weeks or more at triple-digit APRs. For the $380 loan mentioned above, this translates to $397.90 in fees, plus the principal amount, or almost $800 in the end.
The practices of most contemporary payday lenders are very similar to those condemned in the scriptures and teachings of Judaism, Islam and Christianity.
The Bible says, “If you lend money to any of my people among you who are in need, do not treat it as business; charge no interest” (Exodus 22:25).
The Quran takes a principled stance against predatory lending – charging even the slightest interest is a sin according to Allah, as it is the responsibility of financial professionals to help people get out of debt as soon as possible, rather than deepen and profit from their debt (Sura 2:275-281).
In the Compendium of the Social Doctrine of the Church, the Catholic Church teaches that “usury is a scourge which is also a reality in our time and which has a hold on the lives of many people” – and Pope Francis recently spoke out specifically against the payday loan.
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