This year, about 12 million Americans will get sucked into the black hole that is the short-term loan industry. Short-term, small-dollar loans, better known as payday loans, have ballooned into a $90 billion market with no signs of slowing down. With a payday loan, you typically borrow between $300 to $5,000 and pay it off anywhere from a couple of weeks to a year later. However, there’s one catch.
Payday loans have an average annual percentage rate (APR) of almost 400 percent. At this rate, a 12-month, $1,000 advance would end up costing $4,130.85 to pay off completely. To put this number into perspective, the average credit card APR is right around 17 percent.
Due to the astronomical interest rate of payday loans, those who take them out often need to take out multiple loans over time, digging themselves deeper into debt with no feasible way out. Before we get into how cryptocurrency like Bitcoin can help, though, it’s essential that we dissect the root of…