About100DayLoans.com

A lot has been said about payday loan businesses charging high fees and interest rates from their customers. It has also been said that people who take these types of loans often fall into a debt trap. The press and some individuals have been lambasting them for some time now. And as a result, there is now a negative feeling about this business among a section of the population. Policy makers too try to take benefit of this situation by imposing restrictions to gain some brownie points. Are payday loans really such a sin?

The fact is that, it is actually the Merchant Cash Advance Lenders (MCAs) in America that are charging huge amounts from their clients, and not the payday loan industry. Several studies have revealed that the cost of a payday loan is at par or even less than what many other lenders are charging.

Let us investigate why the conventional Merchant Cash Advance Companies charge so high.

1. Commission – These businesses often have to pay a commission to individuals for bringing in the business. This is their acquisition cost. The commission can be quite high. Often, it comes to 10-15% and sometimes even more of the total factoring rate of the funding agency. Indeed, marketing costs have sky-rocketed in the last few years. For a $30,000 advance, the average acquisition cost can be close to $3,000. They will naturally have to cover this expense.

Payday loan companies also have to deal with acquisition costs, but it is much less, as these businesses work directly with consumers. Payday shops are located in local neighborhoods. They work with local communities. Online payday loan applications are so cheap to maintain. Any cost saving for the business is obviously good news for the consumer. It means that the benefits can be passed down.

2. Underwriting – A huge portion of the underwriting is in the operations. It comes from paying the salaries, which again can go into thousands of dollars as these businesses employ a lot of people. There are overhead expenses too, which too can be quite high. For a business that is personnel intensive, it can be anything between 5% and 10%. All this can eat away 7% to 8% of the gross profit margin easily. Obviously, these costs are passed down to the consumer, who eventually ends up paying much more than what was necessary.

Individual payday companies are small entities on the other hand. They are local players with low overhead expenses. There is hardly a lot of outflow towards salary. Sometimes, these firms don’t have any employees, or just a few.

3. The cost of capital – This is another serious issue that affects the conventional lender. Often, a loan product that was originally for a period of 6 months gets extended to 9 or 10 months because the loan could not be repaid on time. The lender’s risk level goes up drastically. Risk factors and underwriting assumptions works against this. Remember, the repayment cycle was based on 6, and not 9 or 10 months. The money that would have been paid back and re-cycled is suddenly not available any more. But the lender is still paying the cost of this capital, even while it is under-performing. This increases the potential of default. The company must cover the risk. Most of them will set up a reserve fund, which again means that this money is not in circulation, while the business is paying for its cost.

Payday loan companies are not faced with such problems. They offer the funds that they have themselves. Yes, there is a liquidity crunch if enough number of clients fails to pay back the due amount in time. But that is rarely the case, as according to statistics, more than 95% loans are paid off on the due date. And why shouldn’t the customers meet their commitments? After all, payday loans are small amount loans that run into a few hundred dollars. Its not at all difficult to pay it back. In fact most lenders get post-dated automated withdrawals forms signed up from their clients. The money gets deducted on due day automatically. This reduces the chances of default to a large extend.

4. Bad debt – This problem has plagued the banking industry since the very inception. Potentially, this can run into a huge percentage. The write-off rate for bad debt can be a whopping 8% to 20%. It depends on how well the business is managing its risks. Bad debt can arise when debtors are simply unable to repay the amount. It could also be from fraud. The bad debt can also arise from a funding program, which wasn’t all that well conceived.

The risk is considerably less for the payday loan operators from all over the United States. And of course, if the risk is less, it would naturally mean that the businesses won’t have to pass it on to its customers, which means that it would be cheaper in the end. As mentioned previously, the total loan amount runs into just a few hundred dollars. There is thus no fraud, as nobody wants to take a chance for so little money. The term is for just a couple of weeks or at most a month, which also brings down the risk by a great deal. The payday loan term cannot be extended in many states. This once again reduces their risks as well.

With all these issues, the lenders can easily lose their shirt. The cost and risk is simply too high. Naturally, most of them don’t want to offer short-term credit programs. And when they are being offered, they invariably come at a steep price for the consumer.

The FDIC recently came out with a detailed report on their “Small Dollar Loan Program“. This report revealed that most other lenders are finding it virtually impossible to compete with the payday industry. Only 31 banks agreed to participate in this program from 446 locations in 26 states. The FDIC report also noted that banks were unable to save their customers any money. In the end, they emerged as costly as the payday industry.

Payday lending has passed the test of time in the US. These loans have been around for some time, and they have helped thousands of individuals from poor and middle-income communities from around the country. It’s a vital source of credit for a lot of people. Many alternative programs have been tried. Nothing has been able to challenge these short-term loans, their rates, and the convenience they offer.

It is time the detractors, law makers and the popular media took note of this reality.

FDIC conducted several studies in the US and found out that banks just cannot compete with the payday loan companies on offering payday loans.

Several studies have indicated that banks and other conventional lenders are not able to compete with payday lending companies, and in fact, they are not even interested in servicing this industry. Consumer experience is much the same on the ground. This has actually been a common complain of thousands of Americans who are in urgent need of short-term credit.

And this idea has got even more established now, with the FDIC coming out with a detailed report of their “Small Loan Program“. The detailed findings of their extensive study have been published in the FDIC Quarterly.

FDIC Study Details

In this study, the FDIC encouraged banks to offer their clients small dollar loans that can be compared with the credit issued by payday loan businesses. The purpose of the study was to find out whether the banks would be able to offer small dollar loans to their customers profitably. The FDIC encouraged innovation in design and execution. Only general guidelines were provided. The banks could largely offer whatever they deemed suitable in the small dollar loan space. Flexibility was allowed.

31 banks participated in this program from across the country, including the Bank of Commerce, First United Bank, Community Bank & Trust, Amarillo National Bank, Lake Forest Bank & Trust, Pinnacle Bank, Wilmington Trust, and BankFive among many others. Most of them, except for The First National Bank of Fairfax operate from many locations. However still, participation was not as good as expected.

The banks that agreed to be a part of the study were headquartered in 15 states. Their net asset size ranged between $26.0 million to $10.0 billion. To be a part of the FDIC program, the banks had to agree to certain supervisory conditions. It was also agreed that the banks will have to process the loan application promptly, the loan amount would be up to $1,000, that there would be low or no origination fees, and they must offer financial education.

Findings of the FDIC Study

The FDIC has discovered that the banks are just not able to compete with the payday loan industry when it comes to making it easy and cost.

Here are some of the findings…

1. Very few banks are offering small dollar loans to customers.

Together, the 31 banks operate from just 446 locations in a mere 26 states. It was further observed that the banks that did not have a small dollar loan product before the program only issued an average of 9 such loans. The total number of such loans issued was 8,346 and the money worth was $5.5 million. On the other hand, payday loan companies issue in excess of 150 million in loans every year.

2. The total loan cost is much the same as traditional payday lending.

It was discovered that this program from the FDIC was not able to save consumers any money. Yes, the interest rate appears lower if the loans are issued over a longer duration of time. However in actual costs, a 15% interest paid over a period of 12 months comes to be the same as 15$ paid for a $100 loan. So in the end, it is much the same as payday loans.

Plus there is another catch. The banks in the FDIC program are issuing loans that are double, or even triple of the average payday loan size. This means that consumers are ending up deeper in debt and that too needlessly, as they didn’t even require all that excess cash in the first place. So in the end, they have to repay much more than what they ought to.

The average size of small dollar loans is around $675, while the average for banks that participated in the program stood around $1,700, while the interest outflow remained much the same in real terms, it was found. The loan from banks ranged between 14 to 16 months, which means that consumers have to stay in debt for much longer.

3. Banks don’t feel that the small dollar loans are profitable.

Though the banks are charging much the same as the payday loan industry from their consumers, but still, the banks don’t feel that their small dollar products are profitable. They are rather seeing this as community service, and a way to bring in consumers for the long-term so that they can eventually sell their more profitable products.

The FDIC report says that just a few banks feel that the small dollar loan program is profitable for them. Most of them used the program to build long-term relationships with their clients in the hope of selling other products to them. They were seen cross-selling other products, and the focus was definitely on this.

This itself beats the purpose of small dollar loans, as those who require this kind of credit belong to the poorer section of the society. A deeper debt over a longer period of time isn’t good news for them. It can drive them towards bankruptcy.

4. Banks issuing small dollar loans are not as convenient for clients.

It was necessary for all the pilot banks in the program to fetch a credit report before they could decide whether the loan application is to be approved or rejected. The report determined whether the applicant would be able to repay the amount. So it was found that the rejection rate was quite high as many of these applicants have average to poor credit scores. On the other hand, no payday loan company would ever ask for this report. And not just that, 10 of the banks in the program required the applicants to open a savings account, which was then linked to their loan.

So What Can We Say about the Findings

Frankly, the findings of the FDIC study are no surprise, though we must complement the FDIC for their effort to find out whether the banks can offer small dollar loans. It is time the banks and other financial institutions realized the importance of small credit products, and that the market needs them. But the sad reality is that, only the payday loan companies are willing to come forward with such plans.

Results of the study shows once more that there is no replacement for the payday loan business. Presently, there is no financial institution in the United States that can compete with them in cost, efficiency or ease.

In real emergencies payday loans companies helps people – no banks, no other financial institution is there to help except payday loan lenders. Read below an interesting case.

The Guardian newspaper reports a very sad incident at Birmingham in the UK recently. Somebody died recently in a Muslim family in the city, but the family was unable to meet the funeral bills of £6,000 because of rising costs. To add to their woes, authorities were not releasing the body as they couldn’t foot the funeral bill. It was a serious situation as according to Islamic traditions, funerals must take place in 24 hours.

So what happened finally?

It was a payday loan company that came to the family’s rescue. No bank, no lending institution cared about the dead person, the family members, or Islamic traditions. It was a payday loan company that offered the real help in an emergency.

https://www.birminghammail.co.uk/news/families-turn-pay-day-loan-10398115

The US Is No Different

The above incident is not an isolated case that is just restricted to the United Kingdom. It’s much the same in the United States as well. Hundreds, if not thousands of families are living close to the poverty line. A huge section of the population isn’t living – they are simply “sustaining” with “barely enough” money. The existence is often from one paycheck to the next.

And the behavior of banks and other lenders is much the same. They are denied credit. Most of them have average to poor credit score. They have nowhere to turn to in real emergencies, situations where they need cash urgently.

The only hope – once again, it is the payday loan industry.

Money is certainly expensive when you are poor, as is evident from the experience of millions of poor Americans. Paying a bill isn’t an odyssey for them. This is a part-time job in itself, and they cannot turn to anyone for help, except the payday loan businesses.

Is it Pointless to Debate Payday Loans?

Paige Skiba, who is a behavioral law and economics professor at the Vanderbilt University at Nashville in the state of Tennessee, certainly believes so. Many people are critical of cash advance loans and a lot of bad things have been said about them, while others have supported them.

But to a large section of the population, this debate is pointless, Skiba says. That’s because, these people will always approach the payday companies when they need cash urgently, if conventional lenders and banks keep refusing credit to them, like they are doing currently. After all, it’s the only source of credit for them. She points out that we need to examine the behavior and motivation of borrowers and the eventual outcome.

John Caskey, a professor of economics at Pennsylvania’s Swarthmore College, which is also sometimes referred to as Swat, agrees with this view of Paige Skiba. John says that we cannot so easily conclude that payday lending is bad.

Skiba has carried out extensive research and found that people who approach for payday loans have an average credit score of 520. The overall population’s mean is at 680. This means that it is very rare that these people will get a loan from another source even if they applied. In fact, many of them have approached conventional lenders before and been denied credit. So when they approach payday firms, it’s their only hope.

The decision these people make at that point is “completely rational”. What happens afterwards is a bit beside the point as these individuals are in a dire financial condition when they are applying for a payday cash advance.

It would be cruel to deny them the credit. It can even break down the American economy itself if a large section of the population went completely broke, and had to declare bankruptcy. Often, many applicants repay another loan with a payday advance. What would happen to these creditors if these people declared bankruptcy, she asks. It could be even worse. For instance, what will happen to the thousands of individuals who approach these creditors?

Where the Center for Responsible Lending Has Gone Wrong

The Center for Responsible Lending has mentioned that the default rate for payday lending is very high. It is anything between 30% and 50%. Those who want a clampdown on this industry will often site this as an argument.

However what they fail to mention in their reports is that, these defaults are just after several interest payments. In other words, the situation can get critical for a customer when the person has not been able to pay back the loan at the original due date, and the loan was rolled-over as a result. It needs to be mentioned here that not all states allow loans to be rolled-over. So this protects consumer interest.

In our experience, a very high majority of clients are extremely serious about paying back the loan on time. In fact, 95% of the payday loans are paid back within the due date, so there is rarely an issue. And besides, you are likely to get into a debt trap if you roll-over any other type of loan as well. So why victimize the payday industry?

Payday Lending – The Best Temporary Solution

Make no mistake about it! A payday loan is not the solution for your long-term financial crisis. Having said this, it is still the best temporary solution for an immediate cash-crunch situation.

These loans let families borrow a few hundred dollars so that there can be food on the table, they keep the heat and light on, and families solving their medical emergencies.

Skiba says regulation cannot stop the industry. Payday businesses will keep opening new store fronts, and people will keep approaching them. That’s because, there is a greater problem in the economy – lack of emergency financial insurance, and the financial system not offering easy credit access.

According to estimates, 12 million Americans are taking payday loans every year now. The average loan amount is $375. On due date, they have to pay back $430.

Revelations from the Pew Charitable Trusts Survey

In spite of all the criticism, a survey carried out by Pew Charitable Trusts indicates that 48% of borrowers feel that these loans are very useful. This percentage would have certainly been much higher if there wasn’t so much bad press on payday loans all the time. On the other hand, 41% said that these loans hurt. 8% respondents said that payday loans are good, with moderation, which by the way is already there.

More than 50% of the borrowers said that these loans provide relief from stress. 3 out of 5 borrowers thus want to take them again. 37% borrowers even said that they will take a payday advance no matter what the terms. 81% borrowers are not worried about debt. They are smart enough to cut spending elsewhere, such as food and clothing to pay back the loan on time.

So it’s clear that most consumers find payday loans very useful and remain committed to paying back their debt.

All of us have money! Some people of course have more than others. And you will agree that most of us have adequate funds that we need for our current lifestyles every month. But the problem arises when something happens, such as a broken car, urgent repairs to be carried out on the home, sudden and unforeseen medical expenses, or critical bills to be paid where non-payment can mean you seize to receive the utilities.

Car repairs are as important as the others, because many people can’t go to work if the car isn’t working. So your car is related to your productivity. If it is not working, then it could mean loss of pay.

Then there are of course life ambitions, such as going on a long awaited vacation or buying something you have always wanted to, but have always been a bit short of cash for this.

Perhaps you have to make a payment and don’t have the funds in your bank. Remember, a bounced check is a serious offense. Late payment fees can be severe too. They can leak you a lot of money.

Sadly, most banks and financial institutions cannot help, particularly in emergencies, as the processing time is far too long. The most important thing in an emergency is quick cash, and that’s what they don’t offer. Sometimes it can take several weeks. Can you afford to wait this long in a medical emergency, for unpaid bills, or if your car has broken down and you can’t get to work? Most people cannot.

This is where a payday loan or a cash advance can help. These are quick loans that are processed and the money delivered to your bank account all within 1 to 3 days. Everything is really easy and convenient about these loans. These are the best loans for fixing your financial troubles quickly and solving the immediate liquidity crunch.

Let’s take a closer look at Top 10 Benefits of Payday Loans:

1. Widespread availability of payday lenders – You will find payday lending companies almost everywhere in the US. These businesses are located throughout the country, in almost every city. They are located not just in the big cities, but also in the smaller towns, and rural areas too. So this means that, it is really easy to find and access a lender in any area. Just walk up to one or call up.

Or, you can apply for a payday online with us. It does not matter where you stay, we will try to connect a lender near your area who will call you once you complete our online application.

2. Convenience – Most of these lending businesses work past banking hours. The online lenders work even on weekends with some active lenders working on holidays. Of course there can be delay in payments as banks are closed on holidays, but at least you know you will get cash when the banks open. And so, you don’t have to wait for the Monday or the office to open. Just apply online. You can apply and ask for the cash at the very moment you need it.

3. Plenty of application options – There are many ways to apply for a payday loan. As previously mentioned you can walk up to the office and apply in person. There are no long queues, which is another advantage. You can call a lender. And of course, a lot of the payday lending companies have their own websites as well. So you can apply online if you want to. All you have to do is just fill out a short form and submit some basic information over the internet. All aspects of the application can be done online. Its very confidential and secured as well. It doesn’t matter where you are located as long as you meet the basic criteria. The processing will begin almost immediately.

4. Privacy – You can maintain your privacy by applying online. Nobody has to know that you are a little short of cash at this time. There is no visiting the local bank and standing in the queue where you may meet your friend or neighbor. Just apply online, and meet the basic criteria. The money is transferred to your bank account in private.

5. Legislation for your protection – There are laws in every state that regulate payday lending. There are financial regulators that are looking at the industry practices and operations of individual businesses to protect the interest of consumers. There is also the CFSA (Community Financial Services Association of America) that is regulating their members and their businesses. Most payday companies are doing self-regulations as well. There are caps on processing fees and interest rates that can be charged in every state. So there are a lot of laws and operational procedures preventing high interests, fees, and predatory practices to safeguard consumer interests.

6. You cannot take multiple loans simultaneously – This is another way consumer interest is protected. There is a statewide tracking system preventing people from taking even two loans at the same time. This is true for multiple states as well. This is a great measure to prevent consumers from falling into a debt trap. You will agree that it is always easier to pay back one single loan. However in certain circumstances you can try to apply for a second payday loan with us. Our lenders will try to help you as much as they can.

7. Qualification is really easy – These are some of the easiest loans to get. All you have to do is just show that you are a citizen of the United States, are above the age of 18 years, have a social security number, and have a stable and regular source of income. You will also need to provide your bank account details where the money can be credited directly. That is all.

8. Credit checks – Unlike banks and other conventional lending agencies, payday loan companies will never carry out a traditional credit check to determine whether you qualify for the loan or not. Of course payday lending companies have their own systems to check your overall financial health – but the checks are done pretty fast. In fact, this is one main reason why the banks take so much time. They have to wait to check the credit score and other information given by you. Even individuals with a poor credit score can get a payday loan, which is certainly a great relief for a large section of the population.

9. Collateral free – This is one huge reason why so many people opt for pay day loans even if they can qualify for other types of credit. There is absolutely zero collateral for these loans. It is ideal for those who don’t have any asset against which they can get the advance, and for those who are unwilling to put up the asset they may have.

10. These are short-term loans – In an ideal world, we would all like to stay debt-free. This is a good idea as well, because the money you have remains with you, or you spend it on you and your close ones. Long-term debt makes life uncertain as well, because nobody can predict what is going to happen in the future. Payday loans are a great option because the debt is only for the short-term here. You have to repay the creditor after receiving the money next month. This means, you can live free of debt and relax. But please ensure you payback the loan as soon as possible. Please DO NOT let a short-term debt become a long-term one.

Get the money quickly when you need it. Say no to delays and hassles. Stay debt-free and make life easy and relaxed. A payday loan can be your best friend. Click here to apply payday loan online with us.

Payday or cash advance loans have often been blamed for driving consumers into a debt trap because of their so-called high interest rates and fees. But statistics tell us another story. The fact is that, more than 95% of the debtors who take these loans are able to repay on time to stay debt free. Those who cannot repay their loans on time will be in trouble, irrespective of the kind of debt they take. It does not matter if the loan was a payday loan or credit card debt.

So why blame the payday loan industry? Most responsible cash advance businesses want to work with their clients to make it easier for them to repay. In fact, it’s in the interest of these businesses that their debtors are able to repay quickly, because that’s the only way the companies can stay liquid to issue more loans.

Here in this article, we are offering 10 free tips to help people pay off their debt quickly to stay in good financial condition.

Check out these top 10 tips to help you pay off your payday loan fast:

1. Automate the debt payment – Payday loans are issued to individuals who have a stable source of income. In other words, your application will be approved only if you have a regular income or salary every month. It would be so much simpler if you can just repay the debt with the money you receive next month. However there are some people who are not able to do that. They would spend the money elsewhere and be left with little for the repayment. So visit the bank and automate the debt repayment. The money should go to your creditor as soon as it reaches your bank. You can spend the balance left in your account. In fact most creditors have the automate payments forms with them. Just ask them and they shall be able to provide you the same. If you take a loan from us, you have the option to make the repayment in an automated mode. On your payday the cash will be directly debited from your account and credited to our account automatically. You may forget to pay so this is the safest route to avoid late payments. Some people have cash but forget to pay, so automating the payments is a great way to avoid late fees. In fact you must automate your payments for all your credit cards.

2. Cut your expenses – You are in debt, so the last thing you should do is spend a lot of it. Make this the central objective of your life for the time being at least. So go ahead. Reduce your expenses wherever you can. Make a plan. Go back to the drawing board and see where you can cut the expenses. Get rid of the costly cell phone plan or cable package. Get something simpler. Try to reduce your grocery budget. There is always something you can do without. You can get rid of the debt easier this way, and will also be left with money in your account that you can save every month. This will help you in the long-term.

One of the best ways to stop spending on things that you do not need is to stop watching TV or reduce watching to a large extend. They show all kids of excellent advertisements and we are compelled to buy. Just do not see them and you stop buying products with little or no use. And of course save money.

3. Increase your income – Have you ever thought of trying to earn more money? By doing this you will certainly be able to pay off the debt quickly. A second stream of income may help you avoid taking a loan in the future as well. Contrary to what many believe, earning a second income isn’t really that difficult. For instance, you could sell off all those unwanted things you have on eBay. You will make some quick money to pay off the debt, and will also be able to reduce the clutter at home. You may also start a blog to make some extra cash for the long-term. Or you may find week-end jobs. There are plenty of ways to make some extra bucks. You just need to try.

4. Make small payments – The term of a payday loan is small – you have to repay the money after receiving next month’s pay check. But if you can make some extra cash in the meantime, then you may consider paying off a portion of your debt with it. This will help you keep your burden in check, and will make it that much easier for you to repay later on. Plus, if you keep repaying, then you won’t be wasting the extra money you are making. Find out from your payday lender if you are allowed to make small payments in the middle of the month.

5. Is there a prepayment penalty – Sometimes there is a prepayment penalty if you pay off the debt early. Ask the creditor while you are taking the loan. If you have taken a loan already with the penalty, then calculate how much it would be in money terms compared to the interest you will save if you pay it earlier. This will help you arrive at the right conclusion on whether you should pay off early.

6. Lower the interest rate – Try to negotiate with the lending company if you can. See whether they are willing to reduce the interest rate. Sometimes, a few companies will oblige, because they too want to do business. These agencies might agree if they see that you are serious about trying to repay your debt. It’s always going to be easier for you if you have to pay off the debt at a lower interest.

7. Borrow against life insurance – One advantage of a payday loan is that, you can get the money you need very fast. It can be transferred to your bank account in 24-48 hours. That is perfect in an emergency. But once you have the money, you will have some time in your hand. So you can try other options. For instance, you can borrow against your life insurance and other savings and policies to repay your existing debt. Yes you will be receiving less money later, but that’s a small price to pay for leaking cash at this point in life. Life insurance interest is below the commercial rates, so you will be saving more than you spend.

8. Borrow from your 401(k) – Similar to the point above, you can borrow up to 50% if you participate in a 401(k) retirement plan at work. So see how much money you have in your account and take out a portion of this to repay your debt. Don’t worry. Payday loans are small dollar loans anyway, so you won’t have to take out too much money.

9. Renegotiate the terms – If for some reason you see at the end of the month that you cannot still pay back the loan, then try to renegotiate the terms with the creditor. Convince the lending agency that you remain serious about paying it back, and there will be many who will try their best to help you. Perhaps your fees or interest can be reduced. You never know unless you ask. After all, the payday company too wants to get the money back. Our lenders will co-operate with you if you inform them well in advance that you will repay your loan but you need some time. Our lenders will work with you to find a plan that works best with both you and the lenders. But please inform them at least one week in advance.

10. Get eligible tax deductions – Are you getting all the lucrative and eligible tax deductions? You will be surprised to know that many people don’t get this simply because they don’t know the details. Get professional tax help if you need. This will help you in your long-term financial health. You will have extra money with which you can pay off the debt. In fact, you may not even need the loan.

We are a payday loan company committed to help our customers. Our payday loan policy is very flexible. If you are late on payments we will work with you to ensure that you pay the least amount of fee and are able to pay off you loan as soon as possible. Click here to apply a loan with us.

The Payday Advance Transaction

Payday advances are short-term, small, single-payment loans. The customer here writes a personal check for the borrowed amount of money plus the finance charges. The loan company then agrees in writing to present the check after the client’s next payday, which typically can be anything between 10 and 30 days.

The customer can redeem this check by paying off the loan and finance charges at the payday, or the loan company can cash this check. In a few states, clients can extend the term of such advance by paying just the finance charges. A new check has to be written.

Loan Size and Finance Charges

Payday loans and advances are usually between $100 and $500. However in some states, advances up to $1000 can be made. Finance charges range between $15 and $20 for each $100 of the amount loaned.

The Underwriting Process

The underwriting process is extremely streamlined with the payday loan companies. An applicant’s income and bank account is verified. Loan companies request that applicants should provide the last bank statement, identification such as driving license and social security number, residence proof, and last pay stub.

The final loan amount offered is usually limited to a percentage of the take-home pay. Credit bureau reports are not asked for. However there are some companies that seek information on the applicant’s present payday loan use.

A postdated check brings down the collection cost. If the client doesn’t redeem the check, then the company can collect the money cost effectively. The lender deposits the check to recover the loan amount and finance charges. However the customer must still have sufficient money in the bank account.

Costs

Consumer lending costs are classified into many categories – taxes, operating cost, and return on the capital invested.

Operating cost is the largest category, as it’s the basic work all creditors must do for extending credit. This includes the cost of acquisition, processing, office expenses, salaries, payment collection expenses, and the cost for bad credit.

Loan acquisition expense is on top of this list. This is followed by payment processing, and collecting past dues.

The cost for loan acquisition includes expenses for taking applications, evaluating them, loan document preparation cost, and the cost of money disbursement. The processing costs are receiving and recording payments, monitoring the account to make sure that the payment is prompt, and contacting clients with past due to collect late payments.

Regulatory Environment

Payday advance loans are regulated by federal and state laws. Plus, there are many lending agencies that ensure self-regulation voluntarily, adhering to industry standards as recommended by the Community Financial Services Association of America.

State Laws

Many states in the US, and District of Columbia allow payday loans with guidelines.

24 of these states have regulations and legislation that explicitly allow payday loans. Typically, state laws have exempted the lenders from any usury or interest rate ceilings in exchange for establishing maximum fees and rollover limits. However, state laws require licensing as well as periodic examinations for making sure that the companies are not violating any state or federal law.

17 states have prohibited payday loans by imposing strict interest rate ceilings, thus making these small loans unprofitable.

For instance, Alaska, Alabama, Virginia, and Rhode Island all have a 36% annual interest rate ceiling on these loans. Creditors here can charge a max of $2.77 on a $200 advance for 2 weeks. This amount is lower considerably than the $30-$45 payday lenders can charge in other states that allow such advances for the same product.

Non-price elements are also regulated by state laws. For instance, there are limitations on the number of times a loan can be rolled over or refinanced. 18 states, including Kansas, Florida and Colorado among others don’t allow customers to retire one advance with proceeds from a new payday loan. 5 states like Illinois and Idaho among others allow the present advance to be rolled over for a maximum of three times.

There are laws to limit the size of the loan too, usually between $300 and $500 for each advance. Some states do this directly, while others limit a check’s size, which includes both the finance charges and the loan amount.

Montana is an exception. Here, the loan amount is restricted to $300 or 25% of the client’s monthly income, whichever is less. Nevada too limits it to 33% of the monthly pay. These limitations are intended to stop consumers from falling too much into debt.

State laws do not allow payday firms from intimidating or forcing defaulting clients. Nevada disallows a lender from harassing clients by posting an NSF check publicly, or publishing a client list with bad checks.

However, some states allow criminal prosecution for fraud. For instance, Hawaii allows the initiation of criminal prosecution if a client stops payment or closes the bank account before repaying.

State laws also require payday companies to submit reports periodically, and submit themselves to on-site examinations. This enforces compliance, and protects consumers as well. Companies that are not willing to satisfy regulatory standards are driven out.

Federal Laws

Payday advances are subject to the Federal Truth in Lending Act, implemented by the Federal Reserve Board’s Regulation Z.

Truth in Lending requires detailed disclosures about all terms of transaction including the price. The price disclosure includes finance charges and the yearly percentage rate. Other disclosures include the loan amount, payment totals, and schedule of payments.

The Fair Debt Collection Practices Act has established debt-collection regulations for third-party collectors. There cannot be any false statements, harassment, or any undue pressure tactics for collecting debts. Most payday lenders however don’t use these collection services, as the small amounts involved makes this uneconomical.

The Community Financial Services Association of America also has a guideline on how collections from debtors can be made.

Self-Regulation

An industry trade association was set up by many payday loan companies in 1999. This is the Community Financial Services Association of America. Presently, the association has more than 60 members companies that run about 5000 offices across the country. This is about half of the total number of payday offices.

The main job of the Community Financial Services Association is to promote favorable regulatory environment the industry and promote industry standards. The association wants to ensure non-prohibitive price regulation, and supports the industry “best practices”, which include the following:

• Full disclosure of the yearly percentage rate, finance charges, and all terms and conditions of the transaction.
• Commitment for truthful and clear advertising.
• Complete compliance with all federal and state laws.
• Promoting consumer education on the loan services, and availability of credit counseling.
• Limiting the number of rollovers to 4 or the state’s maximum. Prohibiting where these rollovers are disallowed.
• Adhering to collection practice limitations as dictated by the Fair Debt Collection Practices Act.
• Provisioning a client’s right to rescind a transaction without any cost.
• Renunciation of threat or using criminal prosecution for collections.
• Self-policing the payday advance industry.
• Support legislation that incorporate association’s standards.
• Assurances that national banks follow association standards when the payday loan is extended because of an agreement with the bank.

Even though we are ourselves payday lenders we would really welcome if banks starts offering payday loans as this will increase competition and improve the product. Consumers will benefit and this is exactly we want.

There was a time when most banks would do anything to get new customers and serve their existing clients. It was the customer’s needs and convenience that mattered above everything else. So they would offer payday loans as well, out of fear sometimes that the client could go to a competitor if the loan money was denied to him. They would still manage decent profits if enough people took small loans. These banks also lived in the hope that by keeping a customer in the loop, one day, they could offer a bigger sum to him at a larger profit.

But something changed down the line. The banks realized that the payday loans were not cost effective for them. The acquisition cost was just too high, and the profit percentage was too less. These loans were simply not working out to their advantage. So the banks stopped issuing these loans. And now, most cost conscious banks are simply not interested in issuing small dollar loans anymore.

It’s a pity, because what most people need are actually these small dollar payday loans because most requirements are simple really. And usually, most individuals think of banks when they need some cash as these are the conventional lending institutions.

Nick Bourke of The Pew Charitable Trust has written in his post dated September 16th that more competition in the short-term credit marketplace is going to be good news for customers as this would improve competition. He is correct in this observation, and a stand we agree with. We, and most others in the payday industry, want the banks to be back offering payday loans to their customers, because we believe that offering these loans is in the best interest of the consumer.

The Banks Are Not Being Very Helpful

However, there were very few banks in this market in the relatively unregulated market that existed before 2013, in spite of the fact that the banks were in a position of offering legal products to help consumers who needed just a little bit of cash to tide over temporary financial constraints.

The fact is that, if the banks had wanted to, then they could easily have competed with payday loan companies and drove many of them out of business a long time back. That is of course not possible anymore, as the payday businesses have proved their worth among the American population and showed that they stand committed where the banks have failed. These businesses offer a real service that helps their clients greatly, and these services are offered where the banks and other lenders fail consistently. Naturally, most consumers appreciate the help they get in times of need.

Payday loan companies have become deep-rooted into the American psyche already. They now operate from thousands of outposts that are located almost throughout the country. These businesses issue thousands of loans every year, serving a wide section of the American population.

Why the Banks Are Not Offering Payday Loans?

Nick Bourke has offered a simplistic view of this. He says that the banks focus on the cost of funds. This includes real estate and personnel costs, which mainly drive the cost of issuing a loan. These costs for the banks on a unit basis are much higher as compared to the payday lenders.

Payday loan companies, on the other hand, unlike the banks, have lower overhead costs. Their retail outlets are located in neighborhoods where people maintain smaller balances. These people are usually poor prospects for credit cards and mortgages. However these are the individuals who require loan money the most as they are from the relatively poorer sections of the society. The requirement is that much more, as these people are denied loans by almost all lenders, including the banks.

Money transfer, check-cashing, remittance and other such high-touch services these people ask for are not consistent with the present models of most retail banks, which depend on electronic and streamlined self-service transactions.

Banks need to underwrite, originate and service small loan installments of $300 for the total finance charges of $35, which is about an average charge for one single overdraft. However currently, this economy isn’t working out for them. This is one strong reason why payday loan companies are often the only hope for these people. Where will they turn to, what will they do, when they genuinely need some money in real emergencies?

It also needs to be kept in mind that many people, particularly those from the less fortunate sections of the society, don’t always feel that comfortable in banks. These individuals often find that the banks are foreboding and unaccommodating, and will thus rather go to a non-bank lender.

Competition Is Good For Consumers

But what consumers really want is competition. Good and honest payday loan companies welcome this too. A competitive environment regulated and monitored through legislation is a welcome move. So instead of passing more stringent laws against payday lenders and virtually killing the business, the regulators should actually take steps to bring the banks back into offering small dollar loans. We firmly believe that this is going to be good for everybody.

What are the legislators going to achieve by killing the payday loan business? Where are the people who need small dollar loans going to turn to? What is going to be the social impact when a large section of the population doesn’t have a way to get money in real emergencies? There are no answers.

It’s a fact that currently there is no alternative to payday loans. So why are the lawmakers of our country trying to kill the only way to get small dollar loans without proposing a viable alternative? Nobody knows. We have to question the intent and the rhetorical statements made in recent times by critics of the payday businesses.

In the right environment, payday loan companies as well as banks and the other non-bank entities should address the credit requirements of their consumers.

In fact, we would even like to go to the extent of saying that payday loans are probably more important than most other credit products. That’s because, if you consider the numbers, than more people take these loans than anything else. The law makers should thus focus on payday loans and make it easier for people to get them, and make it worthwhile for the businesses to offer them. They should take steps to make the banks start offering them again.

The Alabama State Banking Department recently decided to carry out a detailed survey to create a new payday loan database. They wanted to find out how many people were asking for these short term loans, in the belief that such a database will help the state have better understanding of the current economic situation. They also wanted to find out the profile of people who were asking for such loans.

However, just eight weeks into this study, the department has come to the conclusion that payday lending is extremely popular in the state. The database is showing big numbers for these loans.

The decision to create such a database was arrived at first in 2013. However, the initiative could only be launched on August 10th this year, after months of delay. John Harrison, the Superintendent of the Alabama Department of Banking, said while launching the program, “There is a need for this type of product”.

The state also wants to track where the money is coming from and where it is going. “We want to know geographically, what part of the state is using it the most”, Harrison says.

Impressive Figures of Payday Lending Companies

The department has been taken by surprise by how popular these loans are among the citizens. They discovered that between August 10th and October 5th, these businesses issued 386,641 payday loans. The total money borrowed stood at more than $123 million. The weekly average is at a stunning $15 million.

Everywhere you look, there are payday loan businesses in the state. In fact, according to estimates, there are 899 payday business outlets now. Interestingly, this comes to more than the total of Subway, McDonald’s, and Burger King outlets in Alabama as together, these restaurants operate from 890 places. That is impressive real estate for the industry, and figures no state can ignore.

Payday Lending Is Good For the Economy

With 899 outlets, the payday businesses are surely employing thousands of people in the state. The newly created database also shows that these lending agencies profited $21.3 million in these eight weeks alone, and so, they are contributing towards the state’s economy too through tax contributions.

Did Harrison already have an inkling of what the finding was going to be? That’s because, while launching the program on August 10th, he said, “I just think it’s going to open a lot of eyes to a lot of people and hopefully, it’ll be good for everybody”.

The numbers that have come out in the report certainly looks very impressive. It proves once again that no matter what some policymakers and critics seem to think and propagate, the actual end-consumers don’t have a problem with these small dollar loans. And that is precisely why, more and more people are asking for these loans when they need some extra cash to solve temporary money problems, or for real emergencies. In fact, if anything, payday loans are actually becoming more popular with every passing day, and that is not just true in Alabama, but in many other states in the US as well.

A similar study elsewhere will probably reveal the same figures too. Currently, there are 15,000 McDonald’s restaurants across the US. On the other hand, there are more than 20,000 payday lending locations in the country. Would there be so many outlets if these companies weren’t so popular, and if they didn’t offer a useful service? Think about it!

Call to Protect the Payday Loan Industry

Elsewhere, there is growing demand that the CFPB or the Consumer Financial Protection Bureau should leave the payday lending business alone. Many members of the Congress have already stood up for these companies, saying that the regulations in place are adequate. Most clients who take these loans use the money responsibly. Statistics tell us that more than 90% of them repay on time.

New regulations that are stricter could bring about the death of many of these businesses, and it’s not going to be good for the economy. You cannot penalize an industry for the deeds of only a few who cannot repay on time. You cannot deny people for the faults of a small minority.

The tide was initially against voices that stood for the industry, but it’s clearly turning now, as more and more people gradually realize that payday loans are very useful for a vast section of the population.

In fact, there has been speculation from educated sources that many individuals who take these loans could end up with bankruptcy if the money is denied to them, and certainly that won’t be good news for the economy. We don’t want to see the Americans homeless. Do we? Credit squeeze could break up families as well and put their future under serious threat. It has also been pointed out a serious cash-crunch situation because of credit squeeze could lead to social as well as law and order problems.

Only last year, one advocacy group launched an advertisement campaign where they painted the payday loan businesses as vicious predators. Celebrities Sarah Silverman and John Oliver joined up, almost pleading people not to take these loans. We are sure that these people have good intentions. But the fact is that, many of them are making value judgments, and are not being rational or subjective.

Findings of the Pew Charitable Trusts

According to the findings of the Pew Charitable Trusts, there are more than 12 million Americans who borrow in excess of $7 billion every year from these companies. Can so many people be wrong? More importantly, many of them are individuals who won’t be given credit by most banks and other financial institutions. Almost always, the conventional lenders simply don’t bother about these people. It is not worth it for them to issue such small dollar loans, as the margins are not that attractive. The cost of loan acquisition is also too high for many of them.

Where will they go for a loan when they need money in real emergencies? There is no answer from these advocacy groups and lawmakers who want to clamp down the business.

If there was a better alternative than payday loans, it would already have been there by now. American consumers have tried other alternatives and in the end, have stuck to these businesses. Don’t underestimate or undermine the American people.

Some people find it difficult to grasp, but the fact remains that the payday lending industry provides access, and is often the only solution, to millions of individuals who would have been shut out otherwise.

And we too here at about100dayloans.com believe that payday loans is here to stay in America.

If you need a payday loan – please fill online application here.

There are a lot of myths on payday loans especially in the US. Many people, including some regulators believe that these loans are bad for consumers because they make them go into a cycle of debt. Let us do an honest and straightforward examination of payday loans to find out whether there is any truth in these claims.

Myth #1: Small dollar or payday loans are very expensive. The interest rate is exorbitant.

Reality:

Payday loans are just for a couple of weeks. They aren’t annual loans. Critics will often tell you that these advances charge a 391% annual interest rate. This is misleading.

Usually the fee is $15 per for each $100 you borrow. In other words, it is 15% for 2 weeks. There is just one way of reaching triple digit APR, and that is by extending the two-week loan by 26 times for the full year. However the industry best practices and state laws don’t allow this. In fact, many states don’t even allow a single rollover, and the states that allow it, the CFSA limits rollovers to the state limit or 4, whatever is lower.

Myth #2: These loans trap borrowers. They get into a cycle of debt.

Reality:

Many studies have proved otherwise. After an extensive study, Clemson University concluded by saying that there’s no statistical evidence that supports this debt argument that is raised often to pass laws against payday lending. The American Payroll Association carried out a study in 2010. According to its findings, 71.6% American employees live from one paycheck to the next.

Most families cannot absorb unexpected expenses without taking a loan for the short-term. Most Americans take payday advances responsibly. Public company filings and regulator reports confirm that more than 90% of such advances are paid back successfully at the right time.

Myth #3: Payday lending companies target minorities and poor people.

Reality:

These lenders offer money to a wide cross section of the population as the demand is widespread. You will find payday loan stores in population centers conveniently located where people work, shop and live.

Increasingly, credit unions and banks are unable to serve financial requirements of communities. A FDIC survey carried out in 2009 found that 73% banks are aware of the significant underbanked and unbanked population, but less than 18% have planned to expand their services to reach these people.

Myth #4: Payday lenders don’t want to be regulated.

Reality:

A vast majority of payday loan companies have always supported balanced and responsible regulations that protect both the business and consumers. Most lenders including the one who work with us are members of Online Lenders Alliance (OLA). And adhere to their responsible lending guidelines.

Myth #5: By charging high fees, payday lenders make billions of dollars.

Reality:

Most banks don’t offer short-term and small dollar loans as it is expensive to get clients who want these loans. Maintenance is expensive too. The Federal Reserve Report of 1999 discovered that no matter what the size of the loan, banks have to spend $174 to get a loan funded.

The Fordham Journal of Corporate & Financial Law ran an article where they mentioned that the payday advance fees don’t deliver high profits. It concluded by stating that the relatively higher fees are justified when the high operating costs of payday business are taken into consideration.

According to an analysis carried out by Ernst & Young, LLP in September 2009, the profit of payday advance companies is $1.37 on $100 before taxes.

Myth #6: Payday lenders offer money to people who cannot pay back.

Reality:

Is this even believable? Which lender will like this? There is no business in offering money to people who cannot repay.

All good payday companies have the underwriting criteria. Plus, the applicant needs to have a checking account and steady income. Many state regulatory reports have confirmed that 95% of these loans are repaid on time.

Myth #7: Payday lenders coerce their clients for collections.

Reality:

All reputed payday lending companies use lawful, fair and professional means to collect past dues – including our lenders. There are ways to file complaints if any company is using inappropriate and illegal means. Do not hesitate to file your complaint if you see something like this. You can file your complaint here: https://www.bbb.org/consumer-complaints/file-a-complaint/get-started

Myth #8: The growth of payday loans is attributed to aggressive marketing.

Reality:

The real reason is a strong consumer demand and the inability of the banks and conventional lenders to offer small dollar loans. Only aggressive marketing cannot make it grow, if there is no inherent strength in it.

Myth #9: Payday lenders mislead consumers and hide fees.

Reality:

These loans are among the most transparent advances in the financial service market. The fee structure is clear and understandable. Surveys have revealed that 95% of customers are aware of the loan fees. Unlike some other loan option, with payday loans, there is no application fee. There are no balloon payments, accruing interest or hidden charges. The cost is always fully disclosed. The terms are clearly mentioned in lending agreements. All reputed companies fully comply with the Truth in Lending Act (TILA) and the Online Lenders Alliance (OLA).

Myth #10: Those who oppose payday lending have the best interest of consumers in mind.

Reality:

The world is sadly not so simple. Many of these activists belong to interest groups that are funded by agencies who can prosper financially if consumers turn away from payday loan businesses. Also, quite often, these activists don’t represent the views of millions of consumers who ask for credit from payday advance companies, use this money and repay responsibly. More than 19 million homes take payday loans in a year. Policymakers would surely have heard a lot more from them if there was widespread discontent.

Myth #11: Consumers will gain if there are more regulations on payday lending.

Reality:

A FDIC National Survey of unbanked and underbanked households carried out in 2009 reveals that 43 million adults in the United States live in homes that seek alternative financial help occasionally, even though they have their bank accounts. So a high number of consumers appreciate financial options. Taking away credit access does not help anybody. Activists who are anti-business should not be allowed to decide what’s wrong and what’s right for hard-working people. Nobody has the right to force consumers to take more expensive credit.

Myth #12: People use these loans frivolously. They end up deep in debt.

Reality:

A huge majority of consumers use these loans for an unexpected expense. The loans are usually not taken to splurge money or on impulse purchases. The George Washington University School of Business carried out a study titled, “An Analysis of Consumers’ Use of Payday Loans” and published the report in January 2009. The study concluded by saying that half of all consumers consider different credit sources, including credit union, credit cards and banks, before opting for a payday loan.

Myth #13: Payday advances reduce welfare of consumers.

Reality:

A study carried out in 2010 says that consumers will face personal difficulty and substantial loss if payday loan access is restricted. It would lead to disconnected utilities, bounced checks, inability to pay rent, lack of funds in real emergencies like car repairs and medical expenses.

Further, researchers at the University of Chicago have noted that payday lending can offset foreclosure increases significantly during natural disasters. Another 2007 study says that payday loans actually help people avoid bankruptcy. More consumers have filed for Chapter 7 bankruptcy in states that don’t allow payday loans.

Myth #14: Payday loans are responsible partly for the financial crisis.

Reality:

Critics have blamed these cash advances even for the recent financial crisis. The fact is that, the government had to put in billions of dollars to bail out many financial institutions. But the payday loan industry stayed committed to offering credit to the millions of hardworking Americans, and that too without collateral. These businesses took all the risks on themselves to help their clients.

An average payday loan is just about $345. The financial obligation is substantially less than the average credit card debt of $7,000 and average mortgage, which is $225,000. So how much impact can there be on the economy?

Myth #15: Credit unions and banks offer cheaper short-term and small dollar loans.

Reality:

There is a lot of demand for unsecured small dollar loans. But the alternatives are different products. The fee structure and terms are different than payday advances. Most of them come with different restrictions. The fee structure is complicated too. Almost all alternative efforts to offer these loans are either through government subsidies, charity based, unprofitable, unsustainable, or they are not available to the vast majority of people.

There was an FDIC 2 year pilot program that urged banks to offer advances like payday loans. A few banks showed interest. However they discontinued the payday alternative after the 2 year pilot program ended.

Fact is if they offered a cheaper option, why would millions of Americans apply for payday loans even today? Everybody is at the least educated enough to understand the interest rates, the payback policies and the ease of getting loans from any source. If there were cheaper options available elsewhere, payday loan industry would have experienced a silent death many years ago – but it is still prospering and growing.