Mar 25

CLEVELAND (Reuters) – As hundreds of thousands of American home owners fall behind on their mortgage payments, more people are turning to short-term loans with sky-high interest rates just to get by.While figures are hard to come by, evidence from nonprofit credit and mortgage counselors suggests that the number of people using these so-called “pay day loans” is growing as the U.S. housing crisis deepens, a negative sign for economic recovery.

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“We’re hearing from around the country that many folks are buried deep in pay day loan debts as well as struggling with their mortgage payments,” said Uriah King, a policy associate at the Center for Responsible Lending (CRL).

A pay day loan is typically for a few hundred dollars, with a term of two weeks, and an interest rate as high as 800 percent. The average borrower ends up paying back $793 for a $325 loan, according to the Center.

The Center also estimates pay day lenders issued more than $28 billion in loans in 2005, the latest available figures. Continue reading »

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