In Borneo (the largest island in Asia) there is a plant called Nepenthes. The Nepenthes is shaped like a water jar and is filled with irresistibly sweet and nutritious nectar. Its gaping throat remains open for business.
Incredibly, the little animals of Borneo flock to the defenseless Nepenthes and dive in to swallow its nutritious filling. However, by the time they find that they cannot escape, it will be too late. Soon the Nepenthes, one of the few carnivorous plants in the world, begins to digest them.
Ignore predatory payday loans and find all possible loan installments with Credible
The insidious Nepenthes is nature’s payday lender. It provides the keys to the kingdom, but once you fall in it is too expensive to escape (if you can even escape).
What Is Payday Loan And What Makes It So Dangerous? If payday loans keep dragging Americans into endless debt cycles, how is that even legal? What are safer alternatives if you urgently need an advance payment?
Let’s examine the payday loans.
What is Payday Loan?
A payday loan is a short-term, high-interest loan that is usually due the next payday. Lenders know exactly when your next payday is as they monitor your checking account and once you have a large enough deposit, they automatically take back what you owe.
Payday loans are typically capped at $ 500, and instead of the regular interest rate, lenders charge fees ranging from $ 15 to $ 30 for every $ 100 borrowed.
If you take out a $ 500 payday loan on the 1st of the month with a $ 15 “borrowing fee”, you owe $ 560 on the payday. In most states, all you need to get a payday loan is ID, bank account details, and proof of income.
What Makes Payday Loans Such A Rip Off?
Defining payday loans is like taking a tour of a gas station bath. It’s difficult not to pause every few seconds to point out something outlined.
Payday lenders call their $ 15 per $ 100 a “15% financing fee” in an attempt to deliberately mislead consumers into believing they are paying 15%. interest.
This may sound good considering the average APR for credit cards of around 18%. However, the payday lender’s 15% “financing fee” is Not Interest.
- 15% APR on a $ 500 loan for four weeks is only $ 6.25.
- A payday lender’s 15% “borrowing fee” is $ 60 400% APR.
Even if you can pay off your debt on payday, you are still getting massively ripped off compared to the loan options in the second half of this article.
Besides, we barely started our tour of the gas station bathroom.
Payday lenders say they must charge such insane interest because it reduces their risk. According to PewThe average payday borrower makes $ 30,000 a year, and 58% struggle to meet their monthly expenses. And unlike banks that lend mortgages, payday lenders generally do not judge their borrowers’ ability to repay the loan.
As a result, almost half Payday borrowers are in default on their payday loans within two years.
So if you are making loans to a risk group, half of which may default, it’s fair to charge a little interest, isn’t it? Yes. Likewise, charging a teenager in a Porsche more for car insurance than a preschool teacher in a Volvo is completely ethical.
However, payday lenders do not charge interest that is appropriate to their risk. They calculate the legally permissible maximum amount, which is disguised in the form of surprise fees for “gotcha”.
To use the example above, if your usual payday comes and your checking account is not $ 560, the following charges apply:
- Rollover Fee: Your payday lender will restart your $ 500 loan and tackle another $ 60 for a total of $ 620.
- Late fee: In addition to a rollover fee, your lender may charge you a “late fee” of $ 15 to $ 100.
- Overdraft Fee: Your payday lender will repeatedly attempt to withdraw the $ 560 you owe on payday, potentially resulting in multiple overdraft fees from your bank.
As a result, the average borrower who takes out a $ 375 payday loan pays back $ 895.
What Makes Payday Loans So Predatory?
As a loan option, payday lenders are not even remotely competitive, charging 20 times the interest of an average credit card. I mean, if McDonald’s started charging $ 80 for a Big Mac, they would likely lose ground to the $ 4 whopper overnight.
Still, there are more payday lenders in the US than McDonald’s. How did they get so popular?
Payday loans offer several advantages over traditional bank loans or credit card debt:
- They are available immediatelyBank loan processing takes three to four days. When you step into a payday lender, you could have $ 500 in your account in five minutes.
- There are no purchase restrictions: To apply for a bank loan, you need to justify your expenses and planned purchases. You can spend a payday loan on anything.
- They’re available to virtually anyone with a paycheck: Over 53% of Americans have been turned down for credit card, loan, or car financing because of poor creditworthiness. Many of them will turn to payday loans as a last resort.
In essence, payday lenders realize that they are a final effort for many desperate Americans trying to pay bills. They then take the opportunity to withdraw as much money from them as possible.
As mentioned earlier, payday lenders charge borrowers the maximum amount of fees allowed by state law and purposely disguise the outrageous interest rates in the form of harmless-sounding “financing fees”. Stake fees are overwhelming borrowers so quickly that 80% of payday loans are taken out for repayment Another Payday loan.
Wait – how is payday loan legal at all?
Payday loans are illegal in 14 states. In 1998, DC explicitly capped interest rates at 24% to crowd out predatory payday loans, and it worked.
But it still exists in 36 states, and while lawmakers generally think the practice does more harm than good, regulation has been slow.
In 2017, the Consumer Financial Protection Bureau put in place extensive laws to manipulate the industry, but the Trump administration put them down. Under new leadership, the CFPB published a statement in July claiming that there was “inadequate legal and documentary evidence” to require lenders to review borrowers’ ability to repay their loans on time.
Currently the interest rates are 391%. The best a consumer can do is take a big step around that quicksand and try one of these alternatives instead.
I Need Cash – What Are Safer Alternatives To Payday Loans?
Needing cash and bad credit is a difficult combination, but these payday loan alternatives are safer and morally far more sincere.
Credible is a bit like the kayak.com of personal loans. Add your borrower information to the website and you will be able to browse the loan options from many reputable lenders at once for free. In particular, Credible does not share your information anyone While you shop, your phone won’t explode with unwanted offers.
When you find an offer that you like, Credible connects you directly with the lender for a hard loan. And unlike a payday lender, Credible doesn’t hide its fees. They don’t have any of their own and only work with transparent lenders.
Much like Credible, Fiona is an online aggregator that allows you to quickly search for personal loan options (including loan types). The competitive advantage over similar aggregators lies in the speed. while other aggregators take minutes Fiona takes Seconds Options to see.
The other separating factor between Fiona and Credible is the list of partners. So, you can try both for the most comprehensive list of options.
Bad credit credit
As the more straightforward name suggests, Bad Credit Loans is a credit options aggregator specifically targeted to borrowers with bad credit (<580). While the process requires a significant amount of personal information upfront, it saves time in the long run by filtering out lenders who are unable to fund you because of your credit.
While Bad Credit Loans has not yet gained a good reputation from the Better Business Bureau, it’s hard to deny that it’s probably the best direct alternative to a payday lender as it offers loans for as little as $ 500 for an APR of 36% or less ; happens to be the upper limit that the legislature is to attempt Apply for payday loans.
If you are a new professional to the United States, you may have trouble getting a loan with no credit rating or Social Security number. Fortunately, there is a Jasper Mastercard® with your name (in the truest sense of the word) on it.
In a break with tradition, Jasper views your income, your professional field and your debt-to-income ratio as application criteria. You can apply up to 60 days before you start working in the United States. There are no fees for international transactions and you benefit from some traditional Mastercard advantages like identity theft protection, price protection and more.
¹ Applicants who have lived in the United States for more than a year at the time of application must provide an SSN. The application check includes a credit check.
²SSN is required within 60 days of activating the card. The card can only be activated within the USA. Applicants who have lived in the United States for a year or more are required to provide an SSN at the time of application and undergo a credit check.
³Check the Jasper Cardholder Agreement and Fee Schedule.
The Jasper Mastercard® is issued by WebBank under a license from Mastercard International Incorporated. Mastercard is a registered trademark and the circle design is a trademark of Mastercard International Incorporated. WebBank, member of FDIC © 2020
Green Dot prepaid visa
Prepaid cards offer several important advantages over normal credit cards. They’re easier to come by if you have bad or no credit, they have spending restrictions to help with budgeting, and some even offer more cashback on all purchases than the best credit cards (a generous 5% in the case of Green Dot).
You may be thinking, “I can’t load a prepaid card when I need a cash loan, right?” However, this is where one of the main features of the Green Dot comes into play. It’s not technically a loanGreen Dot’s ASAP Direct Deposit feature can speed up payday “by up to two days”, presumably by speeding up the background process.
It’s unclear if ASAP Direct Deposit will be faster than other banks’ direct deposit processes, but it is certainly faster than waiting for a check to be issued by Payroll. It may close the gap and avoid the need for a cash advance.
In Borneo, the victims of the Nepenthes are slowly realizing that there are better sources of food in the jungle. The convenience and instant relief of the Nepenthes’ deadly nectar are certainly alluring, but with so few animals escaping, it is difficult for the rest to fail to see the cruel truth behind its deceptive offer.
Each year, more and more Americans fall into the “debt trap” of payday lenders. The average person who walks into any of their 14,000+ locations to borrow $ 375 will end up paying back $ 895. In 2016, the payday loan industry alone paid $ 6 billion in interest while its borrowers wallowed in debt. In my subjective opinion, the system can at best be viewed as morally bankrupt profit.
Objectively, however, there are superior alternatives to payday loans. The aggregators, lenders, and prepaid cards listed above are just a few of the financial institutions and startups that are dedicated to helping Americans with low or no credit. Because you shouldn’t be excluded from fairness, transparency and dignity when you are in need of money.