Pawn Shops. Are they +EV? - Page 2

Guppies · #11 12-10-2006, 02:22 PM

Not that it really matters to most of the people who post on these forums, but those payday loan places really screw over a lot of people. So how much is your piece of mind worth?

Colt McCoy · #12 12-10-2006, 02:47 PM

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Not that it really matters to most of the people who post on these forums, but those payday loan places really screw over a lot of people. So how much is your piece of mind worth?

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They don't screw people. People screw themselves. Yes, they charge pretty exhorbitant interest rates, but no one forces you to live above your means or take out loans you can't afford.

But I'm guessing most of the people that use those places are also not bright enought to know the difference between peace and piece.

Guppies · #13 12-10-2006, 08:50 PM

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But I'm guessing most of the people that use those places are also not bright enought to know the difference between peace and piece.

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Dude, no need to take low blows. I was just pointing out that the business model is pretty morally unsound and that should factor in to one's decision on whether or not to pursue it. I think its a pretty fair assumption that opening one of those places in a location where there previously were none increases a person's likelihood to use the service and thus negatively affect their financial situation.

spex x · #14 12-10-2006, 11:14 PM

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But I'm guessing most of the people that use those places are also not bright enought to know the difference between peace and piece.

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Dude, no need to take low blows. I was just pointing out that the business model is pretty morally unsound and that should factor in to one's decision on whether or not to pursue it. I think its a pretty fair assumption that opening one of those places in a location where there previously were none increases a person's likelihood to use the service and thus negatively affect their financial situation.

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I don't really see how it is immoral. Payday loans provide a service that people obviously need, otherwise they'd be out of business. If someone needs a small loan and has no credit and can't borrow from family or friends, payday loan is a great choice. Sure, the lender takes a fee for the service, but why shouldn't he? Is the bank immoral for the interest that they charge on my mortgage? I don't think so.

IMO, everyone wins. The borrower gets the money to pay bills, buy birthday presents, whatever, and the lender gets to make a profit. What is immoral about that?

Guppies · #15 12-10-2006, 11:53 PM

The regulations on payday advance type operation are much less stringent than that of a bank loan. Payday advance operations take advantage of this fact by charging an exorbitantly high interest rate. I agree that the idea isn't immoral in principle, only in practice. If someone started one that charged reasonable rates I'd have no problem with it.

Jeff_B · #16 12-11-2006, 12:03 AM

Why do you think the rates are so high for payday loans? its a risk

If I am going to get a payday loan vs using a credit card, I am in need of cash badly and therefore I would pay the extra $

fatass748 · #17 12-11-2006, 03:13 AM

Well here we have new regulation that limits the interest to 60% per annum which is considerably less then the 500%+ that is common for payday loans.

After inquiring more I've found that it takes a $10,000 bond just to get the licences. After that the only investment is rent, utilities, and stock/cash. Maximimum loan here is 1500. I'm not sure what kind of start up capital is going to be required. Think a half year's worth of rent and utilites plus 20k for stock and lending is enough to start?

mo42nyy · #18 12-11-2006, 09:09 AM

Look at bluehippo.com- complete and utter rippoff- I laugh everytime I see their hilarious commercial. They blatently rip off retards. Its so obvious that these people deserve what they get. Its called Darwanism. Pawn shops are no different.

maxtower · #19 12-11-2006, 11:42 AM

Your argument that payday loan places are immoral is silly. They charge interest for a loan. Banks do the same thing. Both have hidden fees. The only difference is in the amount of interest. The market however determines the amount of interest. There are enough payday loan places around to ensure adequate competition. If it was illegal to charge interest above a certain amount, then there would be a group of people with high credit risk who couldn't get loans because no one would lend to them at the legal rates. This would probably open up a black market for loan sharks complete with leg breakers showing up to people's houses. Why send this business underground? Where do you draw the line at interest rates? If inflation were to take off as it did in the 80s, normal interest rates could go well above 10%.

Guppies · #20 12-11-2006, 12:38 PM

Just because a competitive market is determining the interest rate that they use does not make the interest rate morally sound. Likewise just because the alternative may be worse does not make the current situation justified. Also, justifying the high interest rates associated with payday loan on the basis that the customers they serve are high risk is more of an excuse than a reason.

Look at the Nobel peace prize winner for this year. He was awarded it for starting a program that gave micro-loans (on the order of a few hundred dollars, the same as a payday loan place) to people who would not be able to qualify for a traditional loan. And he did it while still offering the loan at a very reasonable rate.

Obviously he was not running a business based on accruing interest off the loans, but what he was doing was unarguably more morally sound than a payday loan place.

Now don't get me wrong, I'm not implying that people on this forum should all give up their goals of accruing wealth and start charitable organizations that offer micro-loans at low rates. I'm just trying to illustrate the fact that although people in this thread are arguing that a competitive market justifies the high rates, really all it does is give an excuse for one to hide behind. You just need to accept the fact that you are offering the high rates for your own monetary gains and you could offer lower rates if you weighed the benefits of others over that of yourselves.

Additionally everyone here should be aware that I'm not claiming to be morally superior to the rest of you. I certainly don't run a charity and I read this forum to gain knowledge that will help me gain wealth. But I also admit the fact that I do so to the detriment of others and just because I take place in a competitive marketplace does not justify this fact on a moral basis.