$8.15
0.12 (+1.49%)
Advance America, Cash Advance Centers (NYSE:AEA)
CAPS Rating:
The Company is a provider of payday cash advance services in the United States.
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The Company is a provider of payday cash advance services in the United States.
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If I wanted a short-term loan like these. I'd go to a loan shark. They just abuse stupid people.
While I am not a fan of expensive loans, I heard (CNBC probably) a good rebuttal to the arguement that payday lenders charge immorally high interest rates.
If a person takes a $30, one-week loan and pays $9 for the privilege, it looks crazy on a percentage basis. But if that same person bounces a $30 dollar check and has to pay his bank a $39 bounce fee, that is clearly worse on both a percentage and dollar basis. The payday lender is required to state an APY for his transaction, while the bank is not. Hence the reason that the payday lender appears to be charging an immorally high interest rate, when in fact it is much lower than the likely alternative.
As much as I hate to admit it, these businesses do offer a service that, under certain circumstances, is better than mainstream financial institutions, and may be a least-bad option at times. I do pray that I am never in a position to need one myself.
(Disclaimers: I do not remember the actual numbers used in the example I heard, just the jist of the rebuttal. I also am not endorsing the use of payday lenders.)
Agreed....although I'd replace stupid with desperate or uninformed...
KhelSkie: Loan shark is better? Really?
Nick: Good example.
Kevin: Agree.
However, the comments are slightly off-topic.
Estimating that the stock will go down because you don't like the business model, simply doesn't make sense. If there is demand, and if it is legal, then it is a matter of checking their financials, and how they compare with the competition.
I fail to see why the abuse of stupid people is a reason to dislike this stock.
Stupid people are something America has no shortage of. One could likely construct a very lucrative portfolio consisting entirely of companies which make money by abusing stupid people.