Markets in Everything: ZestCash Loans
Yesterday, former Google CIO and VP of engineering Douglas Merrill launched an online loan service called "ZestCash," to "serve the underbanked" and provide an alternative to payday loans.
From the ZestCash website:
"ZestCash offers a fair and transparent alternative for people who need short-term loans but do not have access to traditional credit. We designed ZestCash loans to help people meet their basic life needs without getting themselves into a vicious debt cycle.
With ZestCash loans, borrowers fully understand the entire cost of their loan and set a payment they can afford. Our goal is to offer a hand up to people when they need it most, not to push them down.
ZestCash loans are currently available in Utah. We will be available in additional states soon."
3 Comments:
for someone "trying to give a hand up not hold you down" these are astounding rates of interest.
i am all for the freedom to transact, so i fully support their right to offer this service, but try playing with the tool:
$500 for 2 months results in weekly payments of $89.89 for a total of $719.12. that is 44% interest paid in 2 months which annualizes to nearly 800%.
it's a better deal to borrow $500 for 6 months and pay back $804 (61% interest for 6 mo, 160% annualized), but that's still a helluva lot of interest.
this seems to me to be very typical of the google mentality:
tell everyone what a great guy you are while actually gouging them and assailing their privacy at every turn.
Inspired from Micro Finance.
We can probably call it "Urban Micro Finance"
The reason small loans have astounding interest rates is transaction costs. You simply can't charge 10% interest and make money. You should really be charging a $500 origination fee plus 10% interest. That would make the reasons why these lenders charge what they do more clear to the activists who rail against them, but it's probably illegal under most state consumer lending statutes.
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