OctoMom Endorses a Payday Loan Company
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UPDATED: Jul 11, 2012
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OctoMom, less commonly known as Nadya Suleman, the woman who gained national notoriety after giving birth to octuplets in early 2009, is now endorsing a payday loan company.
The endorsed company’s name? OctoLoan, of course.
OctoLoan claims to grant consumers fast online loans of up to $1,000 and has a small portrait of Suleman with a quote saying, “OctoLoan is a trusted source that connects you to cash lenders nationwide when you need a short term loan fast.”
These instant loans are often the subject of critique amongst financial advisers and consumer advocates. These quick forms of financing grant virtually anybody access to cold hard cash, but each one comes with very steep fees.
Most payday loans come with a fee of $15 per $100 borrowed. But don’t mistake that for a simple 15 percent interest payment. That $15 fee is charged every two weeks. Consequently, a $100 payday loan with a $15 fee has an effective annual percentage rate (APR) of 390 percent.
If borrowers don’t pay off their short-term loan quickly, that bi-weekly fee can really add up.
Consider a $300 payday loan that comes with a $45 fee ($15 per $100 lent).
“When a [payday] loan becomes due, most borrowers—[who] by definition, [are] financially troubled from the beginning—cannot afford to pay it back and still make it to the next payday,” explained Eric Stein, senior vice president of the Center for Responsible Lending. “To avoid default, they do one of two things: pay another $45 to keep the same loan outstanding until another payday, or pay the full $300 back, but immediately take out another payday loan to handle their living expenses.”
OctoLoan, however, conveniently omits the prices of their loans. Instead they offer a diplomatic excuse, saying that, “rate and repayment information will be presented to you if you are approved by a lender.”
But they do provide an example of what one of their short-term loans might cost: $25 per $100 borrowed, which equates to 651.79 percent APR.
Aside from apparently trying to ride the coattails of their famous (or infamous) endorser, it is not immediately apparent as to why OctoLoan chose their name.