Want Some Debt in Your Back-to-School Backpack?
The Dave App hopes you're studying a short-term loan with high interest rates
Back-to-school is an exciting time, but can also be fraught with unforeseen perils.
One of these is finding ways to pay for the inevitable unexpected expenses - yes, you know this time means certain costs, but it there are sometimes surprises.
And that’s what fintech lender Dave is counting on.
In a marketing email sent on August 15th, Dave suggests a cash advance of up to $500 could help manage back-to-school expenses:
The costs of heading back to class can add up quickly. Request an ExtraCash™ advance to cover expenses now
Seems easy enough.
Take out a short-term loan from the convenience of your phone. Pay it back in two weeks (that is, IF you have the funds available by then), and then go on about your life.
But, Dave is not in the business of just giving out cash - Dave also wants to turn a profit.
And, with effective interest rates in the triple digits according to one L.A. Times story, Dave can make some pretty decent bank:
Given that the money had to be repaid in 12 days, the $5.99 fee and $2 tip, if considered as interest, cost Goad 122% on an annual percentage rate basis — a metric that helps compare the relative cost of loans. If he tipped $6.93, the company’s average in the first quarter, it would amount to an APR of nearly 200%. If he chose a 15% tip, the total cost would rise to $35.99 with an APR of 547% — corner payday loan territory.
Unless getting caught in a debt trap is on your academic agenda, I’d suggest you steer clear of Dave.
MORE on the Dave App:
Add Debt to Your Weekend Plans with Dave
Dave Can Send You into a Debt Trap in 5 Minutes or Less