Government protection is often too little and too late. Victims of predatory lenders like Western Sky and its affiliates can only regret their decisions to take out loans with ridiculous and usurious terms. The “Problem Solver Loan” is no different.
Accepting a $10,000 loan with a 89.68% APR interest rate would be considered by most educated people to be insane. If you accept such a loan, you must understand that you have nearly a zero percent chance of repaying that loan according to their terms. Here is what you consent to:
You will have to make 84 monthly payments of $743.49. Your $10,000 loan (you actually only get $9,925) would cost you $62,453. If you fail to repay the loan, the lender will pursue a judgment against you and wage garnishment using a tribal court where you likely cannot travel to to contest the legal action.
Are you really willing to repay $62 Grand in exchange for a measly 10? If so, then you are an idiot and you are responsible for your own financial failures. If that statement upsets you, then you should take a close look at your financial decisions up to this point, and how they have contributed to your current weak financial condition.
All insults aside, the fact that you are at this page is confirmation that you are smarter than the average victim and are actually researching the negative consequences of taking out the Problem Solver Loan or any other predatory loan product. You would probably be interested to know what the interest payments are on this type of loan.
You may expect to pay a relatively high amount of interest in the early months on an installment loan product, but the amounts paid on this loan are staggering. Your first monthly payment of $743.49 would only apply $1.75 in princpal. The other $741.74 would be interest, bringing your $9,925 original balance (remember the first $75 is another fee) down to $9,923.25. You cannot even buy a Big Mac with the amount paid towards principal in the first month.
The same loan with the effective rate of my home mortgage would only require a $132.87 monthly payment for the same 84 months. Compare the difference between the rates:
|Problem Solver Loan||My home mortgage*|
|Interest Rate||89.68% APR||3.385% APR|
|Term||84 months||84 months|
|First Principal Payment||$1.75||$104.87|
|First Interest Payment||$741.74||$28|
* Home mortgage term and principal have been adjusted to match those of the problem solver loan for comparison purposes.
Victims rarely understand the interest costs of a high APR loan, but they do understand monthly payments. Would you prefer a $743.49 monthly payment or a $132.87 monthly payment?
When you have income and credit challenges, then you may be subject to a higher interest rate. Still, even the highway robbery rates charged by consumer finance agencies of 25% or more would still only result in a monthly payment of $251.22, which is only about a third the required monthly payment charged by Western Sky partners.
Those who understand the costs and still go through with it are either deranged, total idiots or terminally ill with no intention of ever repaying the loans. Otherwise, there are much better options than Western Sky’s Problem Solver Loan.
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!
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