> ...ZestCash’s own rates, which run between 242% and 462% APR (not a typo)...
Yeah, and a 5% APR on a 30 year mortgage would look ridiculously large if you quoted it as an MPR (Millenium Percentage Rate).
The only utility of using a standard such as the APR is to compare loans with the same term. Quoting a one week, single payment period loan in terms of an APR leads readers to compare its magnitude with that of other much longer term loans; this is a wholly disingenuous attempt to appeal to emotion over basic mathematical reasoning.
Basic mathematical reasoning actually pushes in the opposite direction: that one should generally prefer to maximize long-run return (or minimize long-run interest payments), so the lengths are only relevant insofar as they change the risk. That does change things, but doesn't make them completely incomparable, and APR is as good a standard measure as any.
If you look at most "normal" debt markets, debts of quite different terms compare on reasonably similar APR scales: a 1-month piece of corporate paper and a 30-year government bond all fall within a few percentage points APR spread. It's not like nobody's ever thought of the idea of an APR curve before!
OK, so work the other way. What's the MPR (Monthly Percentage Rate)? If I'm using their lowest rate option and borrowing $250 for 6 months, I get an MPR of about 20% If I count the origination fee of $75, I get just under 25%. In contrast, my moderately high credit card which also lets me take short-term loans charges about 1.5% MPR. Is ZestCash really worth 13 times more? Are they taking on 13 times the risk?
You can play with the terms as much as you like. ZestCash is a rip-off compared to any other option.
Nobody anywhere speaks about MPR, though, and if people did, we'd be used to the typical MPR ranges that a reasonable loan actually falls into. A 462% APR isn't staggering because it's "462" in isolation, it's because it's 462 compared with numbers like 30 (credit card) and 5 (mortgages).
ZestCash loans are marketed and scheduled for 2 month to 6 month terms, and that APR percentage includes a 30% origination fee that's about double the typically origination fee of most payday loan companies.
Yeah, and a 5% APR on a 30 year mortgage would look ridiculously large if you quoted it as an MPR (Millenium Percentage Rate).
The only utility of using a standard such as the APR is to compare loans with the same term. Quoting a one week, single payment period loan in terms of an APR leads readers to compare its magnitude with that of other much longer term loans; this is a wholly disingenuous attempt to appeal to emotion over basic mathematical reasoning.