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Question for the Money Doctors

Question submitted on May 14, 2021.

Question

I have a two-tiered question. First, do you agree that a traditional installment loan structure is the best model for small-dollar loans, offering the least risk and best opportunity for financial security? Second, some states either have passed or are considering a 36% APR cap - on all loans across the board. I would love to get AICPA's thoughts on how this would impact lower-income, credit-disadvantaged Americans. Thanks!

Answer

We are Money Doctor volunteers and do not represent the AICPA.   Accordingly, I cannot comment on their position regarding your question.

Also, as volunteers, we do not and cannot comment on policy matters.   These may be issues you can bring up with the regulators, government officials, and legislators.

I frankly don't understand your question, but I can address the issue of debt.

You need to be very careful when taking on debt.   If you are going to take on debt, such as a car loan, student loan, credit card debt, mortgage, or any other type of loans - you need to understand the terms and condition of the note.  What is the interest rate?  How long do you have to pay it off?  What type of security is required?  What happens if you are late?

Do not take on debt if you cannot pay it off.

Avoid debt by saving money to buy something such as a car.   Save money monthly into a savings account so you can make a larger down payment on a car vs. taking a larger car loan.

Instead of taking on student loan debt, apply for scholarships and look at ways to lower the cost of education.

There are many things that can be done to avoid debt.

Be mindful.


For additional information visit //www.360financialliteracy.org/

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