National Payday Loan Blog

Curently in the Lead:

The 2015 NPD Scholarship Competition has $1000 Prize

scholsmallIt’s back! The National Payday Scholarship Competition has returned with $1000 to put toward your higher education.

A 600 word essay could win you a $1000 scholarship to the school of your choice.

We know how expensive college can be. We would like to pitch in – all you need to do is show us your academic prowess by submitting an essay (600 words minimum, 1200 words maximum) about how payday loans could be improved to better help the people they serve. (more…)

Tips & Tricks to Maximize Your Payday Loan

11415401116_1c9c55b68e_oSo you need a payday loan. You don’t want a payday loan, but forces beyond your control require you to have more money than you possess. You don’t have a few weeks to wait for a bank, you need the funds quickly.

No one wants to be in this situation, but if you are in this situation, there are a few easy tips you can follow to get the most out of the experience. How do you get the least interest? How do you make sure you’re working with the right company? The following list gives you some pointers from the insiders perspective on how to Maximize Your Payday Loan. (more…)

How Ohio Successfully Handled its Payday Loan “Problem”

ohio1From the moment it officially joined as one of the United States, Ohio has been a leader of American industry, innovation, and finance. From Cincinnati to Toledo, from Cleveland to Columbus, and every point in between, Ohio has been the heart of the Heartland, and has lead the way for a nation.

This includes the industry of private lending. Not only for the availability and diversity of loans (payday loans, car title loans, personal loans, paycheck advances) but also for the oversight and regulation of these loans. Without being unduly restrictive on businesses, Ohio government has also made all the right moves to protect their citizens. (more…)

The Lone Star State is the Loan Star State

14161021149_b6b7514f6d_zFrom Amarillo to Brownsville, from El Paso to Galveston, and all points in between, the history of Texas has been defined by its self-reliance and spirit of enterprise. Currently there is new legislation being discussed about payday loans, and how the government should treat them.

But in all the debate and political wrangling, one historical fact is being overlooked: payday loans are just the latest incarnation of private lending, and private lending has been a driving force in Texas finance since it was a Republic. (more…)

How is a Tax Advance Loan Different from a Payday Loan?

5512347305_20dda91167_zIt’s Tax Time!

Depending on what kind of tax bill you are anticipating, you fall into one of two camps: those who will have to pay, and will thus put off filing for as long as you can, or those who will receive a refund. For those folks, you can’t possibly file fast enough, and that refund – no matter how fast it arrives – is still too slow.

Some people have come to depend on that annual tax refund as much as they do a paycheck. In many cases, the money is spent (or promised) before it ever touches the person’s bank. A difference of a few days could have consequences, causing financial trouble if that refund check is delayed.

Which is why, many years ago, something was invented to address the problem: Refund Anticipation Loans, or Refund Anticipation Checks (which is becoming more common now that tax preparers don’t want you to think of it as applying for a loan… which you are)

But the real question is – are these refund advances a legitimate service you can count on, or are they a glorified scam?

A Brief History of the Refund Anticipation Loan (RAL)

Before the 1980s, there was no electronic tax filing, and no refund anticipation system. You filled out the forms, mailed them in, and waited for a hard check to be delivered by the post. There were no other options.

Once e-filing began, tax preparers began rolling out programs to get their clients a tax return within 24 hours. They did this not by magic, but by essentially giving each client a loan, using the impending tax return as collateral. The client would pay a refund fee (in addition to paying for the preparation of the tax return), and be “given” their refund money, which was a loan that was repaid by the preparer keeping the tax refund when it arrived.

It didn’t take long for people to start gaming the system, and by 1994 the IRS advised against the practice. But the idea had been floated, and people liked the idea of not waiting for their money, so Refund Anticipation continued. Not only through tax services, but also through major banks, credit unions, and even some seasonal businesses that only existed during tax time to provide this service.

6921643174_29ae238224_zFederally regulated financial institutions were forced by federal regulators to stop issuing Refund Anticipation Loans in 2012. That meant a great deal of known and trusted establishments were out of the RAL game.

Banks may be done with RALs, but Americans still want them, and they are as popular as ever.

Should You Use a Refund Anticipation Loan?

This kind of loan, not unlike a payday loan, is basically just a short-term loan with higher APR than a bank would charge. As with payday loans, Refund Anticipation Loans are widely maligned and viewed as scams or rip-offs.

But the truth of the matter is that there is nothing inherently sneaky about a RAL. You agree to terms, pay what you need to pay, get your refund early, and move on, right? In theory, that’s how it always works, but you need to very cautious about where you got for this loan.

The three largest tax preparation companies in America all offer their versions of a refund advance. These are considered the safest places to go for your RAL, as they are established national companies with long histories. Small independent tax preparers also often offer these loans, but the veracity of these companies would need to be verified on an individual basis. Finally, many payday loan companies also offer these kind of loans. These lenders usually are in business year round, but only offer RALs during tax season.

Do your research, find out if the tax company is reputable, and what the terms are for the refund advance. A refund advance is just a tool… but make sure you know who is holding that tool before you ask them to use it!

 

Arizona to Revive Payday Loans as “Flex Loans”

6865889457_5aedba70d6_zReversing years of legislation on the matter of consumer loans, the Arizona House Commerce Committee just voted to approve a new proposal to allow state resident access to a new kind of loan. Called “flex loans,” they have been described as “payday loans version 2.0.”

Supporters celebrate the vote as a boon for the working class people who often times rely on these loans, because banks will not loan them money.

Opponents point out that Arizona decided to get rid of payday loans over seven years ago, and that flex loans are just payday loans with a fresh coat of paint.

Who’s right? Could they both be right? (more…)

Fees vs. APR: Payday Loans Explained

6305125858_54c530aa65_z           Banks and most mainstream lenders use APR (annual percentage rate) as measuring stick to compare their different loans. APR is a way of calculating the amount of interest you pay on a loan over the course of one year.

Smaller loans have shorter repayment windows and higher APR, while large loans like mortgages have much lower APR, with perhaps 20 years as a repayment window.

But there are almost no mainstream banks or lenders that offer the small loans many people rely on. Even the small “personal” or “signature” loan at a bank will be for several thousand dollars. Not only are they hidden behind a maze of red tape, but for many borrowers it is just too much money. Even if they had the credit rating to be approved for $5000, they don’t want that much.

That is where payday lenders come in. Cash advances, or payday loans, are micro-loans of $100 to $500, designed to be almost immediately repaid.

As part of an ongoing smear campaign, mainstream banks attack payday lenders for their high range of APR, while ignoring one key fact: payday lenders don’t base their business on APR like banks do. It’s apples and oranges.

For a payday loan, you pay a fee for the amount of money you borrow (usually 25% of the borrowed sum). APR doesn’t apply because these loans are for small amounts with small repayment windows – a typical payday loan is for a few days, up to as long as a month. As they are based around the borrowers pay schedule, they become due on the customer’s next payday.

apr_disclosure`            Thusly, when a payday lender is attacked for having “1000% APR” it is misleading. In truth, they paid a 25% fee for the loan. If by some chance they do not pay that loan back for a year, then yes, they will have paid a large amount of money to repay a very small loan. But it still isn’t “1000% APR” its “repeated payment of the same fee because they did not repay the loan when they agreed to do so.”

A perfect example of this principle is found at the Redbox movie rental kiosks.

You pick out a movie, select it, and swipe your card. You have agreed to rent this movie for $1.25 per night. If you do not return the movie within 24 hours, you are billed another $1.25.

You keep the movie for 10 days, return it, and then claim “the Redbox charged me $12.50 to rent a movie.” Of course it didn’t – they charged you $1.25 per rental, and you simply did not return the movie.

If you keep the movie for 30 days, you will have paid $37.50 for a rental. Which is a ridiculous number, but also isn’t accurate of the typical Redbox transaction, which costs… yep… $1.25.

And so it goes with payday loans. The typical payday loan transaction is for a small amount, and repaid quickly for that same amount plus 25%. It’s not 1000% interest, never has been, never will be.

5 Things Payday Lenders Don’t Want You to Know

13048316734_e8e30382ed_zThere are thousands of payday loan stores across the US, with hundreds more on line, and they all have one thing in common – they want to lend you money.

Many of them have something else in common: they don’t want you to think too much about borrowing from them. They proclaim how “fast” their loans are, because they want to get you on the hook before you know what you are agreeing to.

While reputable lenders have nothing to hide, the shady lenders have a few things they DON’T want you to know. (more…)

Payday Loans Going Global

3603441685_bfd704c4f0_zThey say there is nothing new under the sun, but in the bigger picture, that simply isn’t true at all. Example? Payday loans.

Although there have been independent lenders for as long as there has been money, what we call payday loans or cash advances actually began very recently. The first payday loan stores opened in Kansas City in the early 1980s, after Congress deregulated the lending industry and opened the door for private lenders to set their own interest rates.

This new kind of lender did well at first, and within a decade there were 200 different payday lenders in the US.

Since then, the industry has grown and expanded to an amazing degree: by 2006 there were over 20,000 payday loan stores, and a rising number of online lenders. The total loan volume was over $28 billion.

Payday loans exploded in America, and quickly started reaching out into other countries. From the handful of small lenders in Kansas City, the payday loans business has gone global, and generates hundreds of billions of dollars worth of loans. (more…)

Fringe Banks Serve Canada’s Working Class

2359387451_93caf5bf60_zIn Canada, just like in the States, lower-income communities are served by a large number of independent lenders, often operating out of store front businesses. These lenders cater to the needs of those people underserved by the traditional, mainstream banking industry.

They are called Fringe Banks, and specialize in low-amount, short-term loans that appeal to working class people often subsisting paycheck to paycheck (more commonly called payday loans). They are growing in number, and causing a new round of political discussions in the Great White North.

Are the Fringe Banks the problem? Or are they simply a response to a problem in the financial world? (more…)

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