What happens when you compare tribal loans to the standard installment loans that are offered by a number of physical (and online) loan companies that are not affiliated with a Native American lender?
There are mixed results but the best, most there are two immediate results that are easy to spot.
The first is that the tribal loans are just more expensive, on the whole, than the standard (non-tribal) loans. Specifically, the standard loans issued by regular companies have lower interest than both the tribal payday loans and the tribal installment lenders as well. It should be noted that the tribal payday lenders have the highest rates out of all classes of lenders.
The second, and this is the reason most tribal lenders are in existence today, is that it is extremely easy to qualify for a tribal loan. In most cases it doesn't matter if you have had bankruptcy, foreclosure, it does not matter what your credit report or your credit score is at any of the big three credit bureaus.
When is the last time you talked about credit and realized that everything and anything you had done in your past, financially, was wiped away completely? An absolute clean slate, financially speaking. This is the feature that is most appealing about Native American loans.
This open door policy on everyone is the key to their success in drawing in millions of Americans. Now this doesn't mean that everyone gets a loan. You do still need a few things, mainly an active (provable) employer and an active, functioning checking account with a bank.
But the fact is that getting an installment loan (meaning the tribal installment loan) is going to be much easier process for those who choose the Native American lender versus the consumer who chooses to work with a state licensed installment loan firm.
What makes the state licensed lender such a burden? Well, there are a few problems that can come up. The state licensed lender will almost always check one or more of the reports provided via the big three credit bureaus.
TransUnion, Experian, Equifax, you know these all too well known names. And you most likely have a credit report with all three of these credit agencies and it might not have the most shining things to say about you.
If you have bad marks on your credit score and negative items outstanding on your credit report then there is a good chance you will be denied credit at the state licensed lender.
These firms operate a more traditional (let's call it bank-esq even though that's not a word) lending business that puts some real checks into their would-be borrowers. This is where things get tricky for many Americans, and I mean as in 40% or 50% of all Americans.
This is why tribal loans have been growing much more quickly than your typical installment loans, such as those offered by companies like The Cash Store or online installment lenders such as Magnum Cash which is based out of Maryland.
The problem with these state licensed lenders are that they are going to be more bound by state laws, and more likely to use credit scores when making their credit decisions on you. So when it's time to decide who to apply for a loan with, you can take that into consideration.
Of course on the flip side of things is the interest rate. Even though it will be easier to qualify for the tribal loan if you do get accepted (which you almost certainly will) and you do sign for that loan then be prepared to pay substantially higher interest costs than you would've if you qualified for that state licensed lender.
This is the give and take that goes on in the industry, on one hand you have a harder time getting approved versus a simple approval process. But then there is the inverse problem where once you're approved for the tribal loan you will be paying much more in the higher APR than you would if you went with (and managed to qualify for) the state licensed installment lender.
Not an easy decision, right? Well for many Americans at this point there is not much of a decision to make, and that's because so many people in this country now have very low credit, in fact they are so low that for many people trying to get a state licensed loan (either from a physical loan store or from an online lender) is just going to be out of the question. They simply will not qualify for it. Many would-be borrowers know this and don't even bother trying to qualify for these products.
In the end, that's why tribal loans exist at all. You didn't see Native American loans being offered 10 years ago and the reason is there was no market for them. Credit was relatively cheap and widely available, and the tribal loan product would have been useless then. What a difference 10 years makes as know it's the last line of loan product that many Americans can qualify for, it truly is the last shop on the edge of town.
There is a lot of criticism leveled at tribal lenders and much of it is deserved, as they do charge extraordinarily high interest rates, at least most of them do. But just remember this fact which is without the tribal lenders probably at least 30% of all Americans would have absolutely zero access to any form of credit, at all, from any source.
That's a sobering thought and it makes you think twice about how good (or important) the Native American lenders are to a number of people in this country.