Why would you ever take out a loan at 400% interest? Because you’re absolutely desperate, or because you have no idea what 400% interest actually means. Well, many people do it every two weeks. It’s called a payday loan, and Slate has an article discussing the findings of a recent study on these “storefront loan sharks”.
In the face of impending legislation that would limit their dealings, some check-cashing stores played nice with the University of Chicago, allowing researchers to interview borrowers and distribute material that explained just how expensive these payday loans really are. The goal was to promote the idea that payday lenders could still prosper even if they were legally obligated to explain their lending practices in layman’s terms.
The result? Even when people fully understood quite how much these loans cost them, nine out of ten people still took the money.