‘Rent-A-Bank’, New “Payday” Loan for consumers has raised high-interest rates alarms.
“Rent-a-bank,” the new “payday” loan for consumers, is raising alarms due to the incredibly high-interest rates! Yeah, many people (consumers) want quicker access to loans and credit facilities, which significantly affects the popularity of payday lenders, as well as “Rent-a-Bank” schemes.
- Payday loans would always have high-interest rates; they are not recommendable.
- Defaulting on payday loans won’t immediately affect your credit score; defaulting for too long does.
- Some payday lenders offer loans of 100% APR or more, even in states with 36-percent limits.
- Sadly, many people would still patronize payday lenders due to the “quick” processes.
Payday Loans: Who Are Payday Lenders?
Payday lenders are simply credit bodies that offer payday loans to consumers with usually very high-interest rates. Payday loans are provided with fixed interest rates over a short time – spreads out on your payday dates, but there are still payday loans that last over six months. There’s no waiting time – payday loans are disbursed almost immediately if you meet the requirements.
Payday lenders adopt the “Rent-a-Bank” scheme to carry on with their activities – high-cost lending. In most cases, before you can secure payday loans, you must have an occupation, which basically means you have a job that pays you on specific dates. Notwithstanding, both salary and non-salary earners can actually secure payday loans.
One main thing that keeps consumers glued to payday loans is the lack of documentation or collateral requirement. Yes, you read that right – you don’t need documentation or collateral to secure payday loans. The duration of these loans is usually between 1 to 3 months.
Disturbing Concerns of “Rent-a-Bank” Schemes
It looks attractive – the offers, seamless processes, and fast disbursement – but Rent-a-bank payday loan schemes are practically one of the worst financial engagement for consumers, especially low-income consumers. The main catch is the triple-digit interest rates enforced by Rent-a-Bank payday lenders. Some payday loans have interest rates that go as high as over 100%; now, that’s incredibly high.
However, payday lenders do not habitually report to credit bureaus, even when their customers have overdue repayments. But if a customer delays for a long time before paying back the loan plus the overdue fee, the payday lender may send the customer’s details to the collectors after the lender sells the debts.
Payday lenders can lend you up to $500 to pay back within 1 – 3 months with an interest rate of about 70%. If you must pick up these loans, ensure to pick an amount you can easily pay back after receiving your paycheck or wages. Due to the high interest rates that may make it difficult for you to clear off payday loans, it is best advised to stay away from them, especially if you’re a low-income consumer.
If you can always repay your payday loans on time, your credit score will remain intact. But then, the high-interest rates would continuously eat deep into your personal finance.