Web Letters | The Nation

Consumer advocate in Lending

The article is a good introduction to investigating payday loans. It is not unusual (nay, normal) for articles not to state methods of calculating an annual percentage rate. This articles states, &#8220;Most states impose interest rate caps of 24&ndash;42 percent on consumer loans.&#8221; Not stated is the loan period time period. Since the subject is payday loans, I will assume that it means 24 percent to 42 percent monthly (nominal) annual percentage rate (NAPR) on a payday loan of the (usual) fourteen days. It is highly unlikely that the writer of this article should know the esoteric method of calculating the current <em>nominal</em>, simple-interest, mathematically untrue NAPR. It is (on the 24 percent loan) using Excel mathematical symbols, 625.71 percent, calculated as 24*365/14. The <em>compound</em> (^ symbol), mathematically true, annual percentage rate is 27,166.96 percent calculated as ((1+0.24)^(365/14)-1)*100. Now, if you don&#8217;t comprehend, Google my name, A.F. Bob Blair Jr., and see other examples. Obviously, the law should change to the compound APR.

A.F. Bob Blair Jr.

Thibodaux, LA

Jun 28 2014 - 9:16pm