Payday loans are low amount loans due on the borrower’s next payday. In Minnesota, the 2020 Minnesota Department of Commerce report showed the average payday loan amount is $ 380, and the cost of borrowing that amount for two weeks is a dreadful 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 single loan, got out of debt and walked away satisfied. But that is not the reality surrounding this predatory loan product.
MDC data shows that the typical payday loan borrower takes an average of 10 loans per year and goes into debt for 20 weeks or more at triple-digit APRs. For the $ 380 loan mentioned above, that translates to $ 397.90 in fees, plus the principal amount, which is almost $ 800 in the end.
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The practices of most contemporary payday lenders are very similar to those condemned in the sacred texts and teachings of Judaism, Islam and Christianity.
The Bible says, âIf you lend money to one of my people among you who is in need, don’t treat it like a business; charge no interest â(Exodus 22:25).
The Qur’an takes a principled stance against predatory lending – charging interest is a sin according to Allah, as it is the responsibility of financial professionals to help people get out of debt as quickly as possible, rather than dig deeper 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” – and Pope Francis recently spoke out specifically against pay day. ready.
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