Native American loans keep growing in popularity and the odd situation is that many (or most) of the customers do not even know they are dealing with tribal entities. The fact that these tribal lenders do quite a bit to omit (without outright denying or concealing) the reality about who is funding these rapidly growing online loans is not too surprising.
Tribal loans are extremely expensive, some much more than others, but on the whole we are talking about some truly high cost credit.
There are other options to the high interest rates offered by the tribal lenders and one of those sources, for those who qualify, is peer lenders.
Peer lending has been coming on strong since some legal issues surrounding these loans were resolved in 2010. Since then companies like Lending Club and Prosper have been funding millions of dollars in loans where the funding is borrowed from thousands of people acting as lenders and the peer lending firms themselves are actually just structuring and administering the loans rather than underwriting and issuing the loans themselves.
The real difference, and the real problem for most borrowers, is that the peer lending companies want an above average credit score. Although it's not written in stone the base minimum credit score a would-be borrower needs to apply with these companies is 660. Now if you are someone who has a 700 something credit score then you're fine, proceed immediately to Lending Club and take part in some loans that carry quite a low interest rate.
The unfortunate reality for the majority of people reading this page is that they do not have a credit score of 660, nor will they have that type of a score anywhere in the near future. Many people reading this will never have a credit score that gets out of the 500's.
These are the people that Native American lenders work with, and advertise to, and in general this is the demographic that supports the existence of the tribal lenders altogther.
If everyone had a credit score of 700 then they could simply turn to more retail (state licensed) lenders like Springleaf Financial. Or they could go with the peer lending community, and get a $5K loan pretty easily with Prosper or Lending Club.
The Native American loans are for those who are in a bad way financially, and there is some irony in this situation because taking on a tribal loan means taking on a very high interest rate.
That's technically the last thing someone who is struggling financially needs, think about a person who is desperate and broke, and now they are going to take out a loan for X amount of dollars and start paying 30% interest every 14 days the loan is outstanding? Not very logical, yet this is the path and the business that tribal lenders feed and create.
Comparing Native American loan companies to peer lending firms is a bit of a mistake. The two different types of lenders are serving completely different customers.
The customer base for peer lenders tends to make their payments on time, have a good credit score and a good job or career. The tribal lending customer tends to operate on a touch and go basis, with little consistency and a low credit score, all of which precludes them from even being able to apply with the peer lenders.
Hopefully as peer lending grows the greater acceptance will create a situation where those with a lower credit score can apply and get some reasonable debt obligations, as opposed to the very high costs that tribal loans offer. But as of today there is no real reason to compare the two lending industries.
Native American loans will continue to serve their desperate and financially trouble customers while peer lenders will keep serving those with stronger incomes and better credit scores.