The number of online tribal loans keeps growing and the choices keep expanding. Or do they? There is a problem with the quality of many online tribal lenders. The problem is many of them offer the exact same loan product, which is the following...
A short-term loan, usually ranging between $300 as a minimum to $1,000 as a maximum, with a roughly 14 calendar duration that carries a 30% interest rate, where there is a $30 finance charge for every $100 borrowed, payable at the end of the 14 days.
Sound familiar? It definitely is a familiar sight if you have any experience with Native American loans. Even though there are over a hundred tribal lending websites the number of companies that engage in this very bland, short-term loan is just astounding. It's at least found at 60% of all online tribal lenders and don't forget that this is their sole product. It's not like they have another type of loan or variations of this loan, because they do not. The customer may borrow the same small dollar amount, at the going rate of 30% interest, which is due after 14 days, or every 14 days assuming the customer gets extensions on the loan.
That's not an interesting loan product for me, and in fact I barely consider that a loan at all. When I think of a loan I usually think in terms of months or years. The concept that I have to be handing back the money I just borrowed within roughly 340 hours of when I first borrowed the funds is just a ridiculous thought for me to accept. What good did the money do me in that short amount of time? The tribal lenders (and non-tribal lenders who issue payday loans) will pitch these types of loans as emergency loans, where you can use the funds to not incur insufficient funds charges from your bank or to pay for a flat tire so you can get your car going again.
These are legitimate problems but turning to a payday lender is not a legitimate answer. There are other companies that offer more money at a cheaper interest rate for a longer period of time, so turning to a payday lender is just an outright bad option. Let's look at a tribal lending company called Mobiloans. If you've searched for tribal loans you have probably come across this company before.
Mobiloans offers a line of credit rather than just a payday loan. The line of credit can range from $100 to $1,500 and can be accessed at any point in time after you establish the line of credit. So right away that's a convenience that Mobiloans gives that no payday lender can provide.
Here's where the payday loan shops really start to fall ap and apart. Mobiloans will loan a customer $500 (just an example amount) for several weeks. After two weeks into the outstanding loan the customer will have to pay 10% of the principal to Mobiloans as repayment. So that would be $500 x 10% which is $50 as a finance charge. Let's compare that to a tribal payday loan store which will usually charge that standard 30% on the first repayment date. So that would be $500 x 30% which is $150 as a finance charge.
What am I missing here? Why would any customer borrow from the payday loan company when it literally costs $100 more in finance charges to do so? It's not like the customer is getting any higher level of service or quality of product. They are both simply a loan for $500. Actually, you could make the case that the Mobiloans product is superior because it was an established line of credit that can be taken out at will (without any further application) once it's created. That's a better situation than actually applying for the payday loan when you need it right away.
All around it's a good idea to steer away from tribal payday loans. Look for tribal installment loans instead, or a tribal line of credit which is the Mobiloans product. Having a longer period of time to repay is good because it gives the borrower the option of extending the loan automatically, rather than constantly (petitioning, requesting) the payday loan company to extend the 14 day loan that technically keeps ending every two weeks. No thank you to that financial product is all I have to say.
Getting any tribal loan is expensive, especially compared to the loans that used to be available in this country. But now that we are in the new age of permanent financial distress we have to look for whatever the best financial options exist. In the case of short-term borrowing the best option is to take a tribal installment loan (or a non-tribal installment loan if you can qualify) than to borrow from a tribal payday lender.
The costs are better, the timeframe is better, and the amount you can borrow is usually better, too. This is a situation where we can work backwards and ask the question, what is better about a payday loan versus an installment loan? The answer is nothing. There is no reason to opt for the payday loan when you can qualify for and get a tribal installment loan with the exact same standards as you would need to qualify for the tribal payday loan.
Make sure to do some serious shopping and researching on your next online tribal loan, because you could easily be throwing away perfectly good money.