Western Sky Financial has become a very successful and lucrative loan outfit. While previously sticking with loans of $2,600 and $5,000, Western Sky has upped the ante with a $10,000 high cost loan. So just how much does this loan cost?
While the terms may sound complicated, here is the simple truth. You would repay $62,453 in order to repay your loan (plus the original $75 fee).
Yes you read that correctly. Western Sky would keep the initial $75 as an origination fee, so you actually can only borrow $9,925. Then you simply make 84 monthly payments of $743.49. That adds up to $62,528.
Have you ever made a $750 car payment? Are you prepared to now? If the answers are no, then you should probably back away from a loan that you clearly cannot afford. And even if you could, you would do far better elsewhere.
The 89.68% APR is nearly 4 times the rate of most consumer finance loans. It is roughly 10 times the rate of many credit unions for a personal loan. And it is roughly 20 times the rate of many used car loans. And if you think the rate is high on this loan, consider the high rates they charge for their smaller loans.
You have near zero percent chance of repaying this predatory loan to term. The few customers who have repaid their loans mostly came up with the cash by taking out other loans or selling an asset so that they could pay the loan off early.
Forget desperate, let’s look at how stupid an individual would have to be to agree to such terms. Consider what you are actually repaying on this loan. In month 1, your total principal payment is only about a $1.75. The other $741 and change is interest. If you buy 2 dollar menu items at McDonald’s, you will have paid more towards your purchase than you put towards your loan balance in the first month.
After 1 full year of payments, you would have reduced your loan balance by a paltry $30.36 even though your payments totalled $8921.88. You may notice that the total of your first year’s payments is nearly as much as you initially borrowed, yet you still owe almost the entire amount.
If you made it this far through this article and still find the need to borrow this type of loan, then understand that your financial distress is your fault and the fault of no one else. It is not the economy, government or your employer’s fault. By continuing to make destructive financial decisions, you are cementing your status as a member of the chronic poor.
There is nothing that is worth having that justifies taking out this type of loan. If you are in need of money because you are not making enough, then how could you possibly afford all of your current bills plus the loan payments that you are obligating yourself to?
Instead, consider earning more money. If you are on public assistance, then look at what you could do to get off of public assistance and actually pay your way. That monthly check does not come from the government. It comes from the sweat and tears of people that work hard to earn a fair living.
Ask yourself if you are a giver or a taker. If you have been a taker your whole life, are you ready to make a change? Government is losing the ability to be able to afford to pay for half of the population to not work. They will have to tighten the rules on public assistance. If you lose the ability, the skills and motivation to fend for yourself, then you will be left behind.
If you choose to take out stupidly predatory financial products, then you are further preventing any possibility of escaping the cycle of debt and ultimately poverty. What do you want to accomplish in life?
Long is a graduate of the University of North Carolina at Chapel Hill with a B.A. in Industrial Relations. He subsequently received his Certificate in Nonprofit Management from Duke University. His Certificate in Financial Planning was issued by Florida State University.
Long has achieved the Accredited Credit Counselor and Accredited Financial Counselor certifications through the Association for Financial Counseling, Planning and Education. Long originally achieved the Certified Credit Counselor designation through the National Institute for Financial Education.
In addition to years of nonprofit leadership, Long has been an innovator in the field of volunteer tax return preparation programs. He assists volunteer associations and nonprofit organizations who seek to integrate credit counseling and asset-building programs with free personal income tax preparation. His approach to using free credit reports as both an incentive and a screening tool for placement into asset-building programs has been shared with members of the National Community Tax Coalition, the EITC-Carolinas Initiative of MDC, Inc. and nonprofit groups across the Carolinas.
Long assists members of our armed forces in the Carolinas, Iowa, Rhode Island, Georgia and Germany with financial readiness. Please support our Soldiers, Marines, Airmen and Sailors!
"The democracy will cease to exist when you take away from those who are willing to work and give to those who would not."