Crunchbase News interviews Nathalie Martin: Beyond Payday Loans: More Startups And VCs Bank On Subprime Lending Alternatives

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And when they get into an emergency, there are not many places for people to receive loan help, according to Nathalie Martin, professor and Frederick M. Hart Chair in Consumer and Clinical Law at the University of New Mexico School of Law.

“Studies have found that people don’t shop around, mainly because of the desperation involved and the fact that there is not much difference in the pricing of the payday loans,” Martin said in an interview.

She sees two problems with the current loans: Lending fees are often high compared to the loan — think a $50 fee for a $100 loan — and people often get caught in a “debt trap” where they keep paying those fees and never actually pay off the principal of the loan, resulting in paying much more than was originally borrowed.

Borrowers desperate for cash often don’t look closely at the cost of the loan when they’re seeking a lifeline, she said, only to realize as they’re paying it off how expensive it truly is.


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