It's a common event these days when you go to a tribal lender's website and the site is no longer responding. Normally this means that the lender has folded their business or the company has switched gears, meaning they have moved on to another website. In 2012 this didn't happen too often but it's much more common in 2013. Whether that's a factor of competition or if the business is just failing as a matter of course is hard to say.
There is a good chance it is the competition amongst tribal lenders that is sending some of the smaller lenders six feet under. A couple years ago there were only about a dozen tribal lenders and not there's well over 50 of these lenders. With a pretty static group of potential customers the massive growth of tribal lenders was bound to be a problem. There simply is not enough borrowers to go around for all of these lenders.
The other factor that may have stopped Lending Booth is just the business model itself. Online payday lenders constantly face the problem of customers who are substantially late on their payments or just stop repayments altogether. These bad customers who default on their loans or who partially default on their loans, it makes it difficult for a smaller lender that doesn't have enough clientele to keep their doors open. This lack of a large customer base combined with a number of customers who can't pay makes the company unprofitable.
Now, it should be clear that we don't know what happened to Lending Booth. It could be a factor that has nothing to do with the financials. And there is a strange situation concerning Lending Booth that sets them apart from other tribal lenders and that is that it's not a sure thing that they are down...
When you go to the Lending Booth website the website is not closed as so many other out of business loan shops. The Lending Booth site shows that they are experiencing website difficulties and the company apologizes for the inconveinice. However, there is a login field that allows existing (old) customers to sign into their account. When you choose that option it takes you to the legacy page of Lending Booth. And amazingly, right there, is all the information from the original company website. This is really strange and this is definitely a first.
It's a shame that Lending Booth is out of business, or currently removed from doing business, because their rates were not too bad. As an example, the finance charge on a 14 day loan was just under $25 for every $100 borrowed. Technically, it was 24.92% which is better than many lenders. Even more interesting was the fact that the Lending Booth loan calculator allowed you to submit for a 31 day loan which was expensive coming with a 55% interest charge for the 31 day loan.
However, and you know this if you've been reading these posts for any length of time, I happen to feel that paying more for a longer loan cycle is advantageous when compared to paying less for the shorter time of 10 to 16 day cycle. Why? It's been my experience that having that extra time to organize funds is a much better way to avoid being trapped in revolving debt.
The problem that I had (and so many millions of other Americans at some point in their lives) is that you take out a loan with every intention to pay it back. However, during the desperate days of doing anything to scratch that loan together, you didn't really notice that you agreed to pay the money back in only 12 days. That's not a very long time and if you get paid every 14 days like most working Americans, well then it's really no time at all. The short-term loan (incorrectly) assumes that you will, somehow, have the money to repay in the 12 days from the date of the loan. But the fact is all of your existing costs like gas, food, rent, car payment, utility bills, phone bill, insurance costs, they are all still ongoing and they will be right in your face at the same time the short-term loan is due.
So what do you do? The game of balancing and skipping payments on something begins. Maybe you short the phone company or the electric company, maybe you ask your landlord for more time on the rent. And there is a really good chance you will ask your lender (in this case the tribal payday company, Lending Booth or some other firm) to extend your loan by letting you pay the minimum amount due, which happens to be just the finance charge. That's the danger, that's the trap.
Herein enters the reason, if you must get a loan, that you get that loan with a longer amount of time to repay. By using two pay periods instead of only one period you have a better chance of saving enough money to do one of two things. First, you can save enough to repay the entire loan, which is most likely for loans up to or under $500. Second, you save enough money to pay the finance charge and a large part of the principal on the loan, for example paying around 65% of the principal. This helps get you out of debt a lot, for me the difference was really just tremendous. Yes, the higher cost of the longer loan hurt. That extra cost per $100 borrowed would be approximately $30, so for a $600 loan it would be an extra $180 down the hole. But you bought something with that $180 which is time. The time to gather more money together, either through a second pay period, money borrowed from other sources like friends or family, or money other ways, like working overtime for example.
The point is that front end time allows you a better chance to escape from the cycle of just paying the finance charge. Believe me that cycle is very real and it's quite easy to fall into. You have to ask yourself why and how do all of these tribal loan companies exist? And why do all of these other regular (unaffiliated from any sovereign nation) online lenders exist? Plus, how do all these brick and mortar payday loan stores exist around the country, with thousands of offices from coast to coast?
The reason is not because Average Joe walks in the door and takes out a $500 loan which he repays in full on his next payday. That's not what is happening in the United States. People are taking out these supposedly short-term loans and they are extending them, which is making a fortune for these loan shops. That's the soap box for today, but it's true.
That's a long way of saying that it's a shame that Lending Booth is out of action because having that option to borrow for a greater period of time can truly help someone in a bad spot. For some reason they couldn't make it as a company, or they have some type of problem that has them in their current hiatus mode. Either way, let's hope they come back with same rates they had or maybe even a little lower.
Lending Booth is closer to what a "good" online loan company should be. Obviously, it would be much better to have traditional bank loans and more reasonable loans that can last for years with far more acceptable rates (remember paying 12%) but that's not going to happen. Getting to have a full month to repay is superior to most current lending companies. Let's hope that Lending Booth gets their act together and gets back into the game.