Subprime Rates

  

Categories: Credit, Bonds

See: Subprime. See: Interest Rate.

Different strokes for different folks. Different rates for different risk categories. Prime rates: 4%; subprime rates: 7%. Huge difference over time in what you'll pay to rent that money.

How do you...fix this? You become "prime." And no, you can't do it by just giving Amazon 75 bucks a year. Instead, you'll have to earn more money, put more money down on that home rather than less, have savings, maybe a stock market portfolio, and exist in a robust industry category...i.e. there's way less risk that a skilled Python Coder can't find well paying work than for a barista, school teacher, journalist, or other non-STEM gig.

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Finance: What are Payday Loans?25 Views

00:00

finance a la shmoop what are payday loans well this you want to stay away

00:09

from payday loans if you are so strapped for cash [girl gives out payday candy bar]

00:14

that you need to borrow money to pay the rent and you only have the promise of [hand takes money and leave I.O.U. sticky note]

00:19

your future paycheck to borrow against well something has clearly gone wrong [girl looking through papers]

00:23

along the way and you shouldn't trust the snazzy-looking television [TV add for loans]

00:27

commercials you're seeing out there a payday loan is a loan using the promise

00:31

of delivery of cash on your payday cheque as collateral and for most

00:36

companies loaning money on payday this is an extremely profitable business

00:41

because they quote only charge you 2% unquote for the loan but let's do the

00:47

math you're getting the cash two weeks early and last time we looked at a

00:51

calendar there were 52 weeks in a year or 26 bimonthly pay periods so if

00:57

they're charging you 2% to lend you money for one of those bimonthly pay

01:02

periods well their annualized rate that they're charging you for lending you

01:07

that money well that's 52 percent a year right 26 times 2% it's 52 percent a year

01:14

even the worst credit cards charge dramatically less than this rate of

01:18

interest so how do payday loan places get away with such high rent on your

01:22

hard-earned money well if you have to borrow money in this form with such

01:27

urgency well you're likely a very bad credit [woman sends man out to pay grandma]

01:30

risk and the perceived odds of you simply vanishing are well they're high [man gets into car with suitcase]

01:35

and the odds you are financially unsophisticated are almost by definition

01:40

certain because if you did do the math you get even an expensive credit card to

01:45

float you the thousand bucks or whatever your paycheck was or five hundred

01:48

dollars for that half month period to just get by until the next month right

01:52

so if you ever find yourself needing a payday loan let's hope you can work a

01:56

few long weekends saving enough money so that you don't need these things anymore [man working on computer]

02:00

and next time well you know what they say stay in school [school kids collaborating on project]

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