Tag: installment loans

  • New installment product in South Carolina

    South Carolina limits borrowers to one payday loan at a time.  When your choice is going of business or offering a product that consumers like and making money, the answer is clear.  You offer installment loans.

    Check ‘n Go just opened 25 new locations offering installment loans.  These installment loan products are typically 12 months and can be cheaper than a traditional payday loan, if used responsibly.  Technically, they’re not new.  I know lenders that have offered this product for almost 2 years.

    If you’re current payday loan software does not offer installment loans, there are many other systems that can get you started.

    You can read the full article here titled “Payday Loan Restrictions Could Backfire.“

  • BBB on payday lenders’ case

    The BBB had this to say about payday lending:

    “In many cases, the consumer complaints involved deals that were signed under the initial impression that they would be receiving a one-time payday loan and provided bank information to the website.”

    I do not know what every lender tells or commuicates to their borrowers; but it should be common sense that if you do not pay the loan on the due date that it will extend for another period.

    With this being said, maybe a product that fully amortizes, but is not more than X number of days may be a better product for the customers.  Unfortunately, this is hard to do under the law in many states, so it may be moot.

    Here is an example of a loan that would fully amortize.  If the customer paid in full on the first due date the payoff would be the same as a similarly priced payday loan, which is about $60, in addition to the original advance.

    Federal Truth-in-Lending Statement
    ANNUAL PERCENTAGE
    RATE
    The cost of your credit
    as a yearly rate.
    388.9452%    		 FINANCE CHARGE
    The dollar amount the
    credit will cost you.
    $125.22    		 Amount Financed
    The amount of credit
    provided to you or on your
    behalf.
    $400.00    		 Total of Payments
    The amount you will have paid after you have made all
    payments as scheduled.
    $525.22
    Your payment schedule will be:
    No. of Payments: Amount of Payments: When Payments are Due:
    2 $175.07 Every 2 Weeks Beginning 3/20/2010
    1 $175.08 Final Payment on  4/17/2010

    Here is  similar loan that’s one payment.  This one payment if rolled over another two times will cost the borrower $180 compared to ~$130 for the an amortizing product.

    Federal Truth-in-Lending Statement
    ANNUAL PERCENTAGE
    RATE
    The cost of your credit
    as a yearly rate.
    390.0010%    		 FINANCE CHARGE
    The dollar amount the
    credit will cost you.
    $60.00    		 Amount Financed
    The amount of credit
    provided to you or on your
    behalf.
    $400.00    		 Total of Payments
    The amount you will have paid after you have made all
    payments as scheduled.
    $460.00
    Your payment schedule will be:
    No. of Payments: Amount of Payments: When Payments are Due:
    1 $460.00 Every 2 Weeks Beginning 3/20/2010

    I know the industry does not like looking at the fee as “interest”, but we have to find better products for borrowers where lenders can make money.