Desperate for cash, many in U.S. taking high-interest 'payday' loans
By Nick Carey
Reuters News Service
As hundreds of thousands of American homeowners fall behind on their mortgage payments, more people are turning to short-term loans with extreme interest rates, just to get by.
While hard figures are hard to come by, evidence from nonprofit credit and mortgage counselors suggests that the number of people using these so-called "payday loans" is growing as the U.S. housing crisis deepens.
"We're hearing from around the country that many folks are buried deep in payday loan debts as well as struggling with their mortgage payments," said Uriah King, a policy associate at the Center for Responsible Lending.
A payday loan is typically for a few hundred dollars, with a term of two weeks, and an interest rate as high as 800 percent. The average borrower ends up paying back $793 for a $325 loan, according to the center.
The center also estimates that payday lenders issued more than $28 billion in loans in 2005, the latest available figures.
In the Union Miles district of Cleveland, which has been hit hard by the housing crisis, all the conventional banks have been replaced by payday lenders with brightly painted signs offering instant cash for a week or two to poor families.
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