The blog of the Urban Institute
September 15, 2011

A 400% Interest Rate - Only for the Poorest Households

September 15, 2011

It hardly needs emphasizing anymore that the Great Recession drove many families into financial trouble. Families are losing their homes to foreclosure or now have bigger mortgages than their homes are worth; jobless rates are rising again; credit is more difficult than ever to obtain.

In this precarious financial climate, many families are turning to alternative financial services (AFS) for emergency loans, often walking away with annualized interest rates above 400%. Not surprisingly, some families are far more inclined than others to obtain these payday or pawnshop loans or other alternative forms of credit.

Our latest MetroTrends commentary explains the AFS market and the local and national trends behind its use. What will be the role of the weakening job market? Will more states prevent AFS loans under usury laws? Read the commentary to get the whole picture.


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