I just finished reading the Wikipedia page. Are you saying that what seems like exorbitant interest rates charged by the loan sharks here are actually a pittance of what the legal payday lenders charge?
Exactly. Also, they prey on a class of the population who is more
often than not incapable of simple math and therefore incapable of
realizing the giant financial quagmire they are stepping into when
taking payday loans.
(they basically fall prey to this : http://en.wikipedia.org/wiki/Wheat_and_chessboard_problem
As to what is happening on these forums, my experience has been
that most borrowers are either:
- miners trying to build their farm and therefore have some
sort of repayment plan organized
- people profiting from arbitrage opportunities with newcomers
wanting to get their hands on coins quickly, even if that means
paying a premium.
- people who want to make a quick BTC purchase on bitmit and
can't afford to wait for the Bank->Gox turnaround time.
In other words, I think lending on these forums - so far - hasn't
been particularly predatory but rather providing useful service.
I also suspect shadier uses of the money borrowed, but I have
no proof or way of knowing.
Bottom line: I believe, and certainly hope that the folks who borrow
here know what they're doing when they accept these type of rates.
You make good points.
There is however on other type of borrower since the interests rates being charged are less than what one can earn.
Imagine being able to take a cash advance off of your CC at say 15% but earn 30% with said cash advance.
Everyone is happy. Until... the CC companies get pushed out of business.