The problem with never having enough money means that the pinch for the holiday season (and let's not parse words here, we are talking about Christmas Eve and Christmas Day) is even more acute than during the rest of the year. Things are normally bad enough for households that can't stretch their dollars far enough to pay for the car note, the electric bill and the rent, so how does a consumer who is already stretched try to come up with extra dollars to pay for Christmas gifts?
First of all, let's put the caveat right here, there is no good solution. The good solution would be if debt was still easy to get via traditional lending sources, or if interest rates on that debt were down around 5% - 10% annually, meaning the APR for the year is that low, not a bi-weekly payment.
Better yet, it would be better if America still produced some decent paying jobs and there plenty of those jobs around so that it wouldn't be hard to pay bills and rent in the first place. Unfortunately all of that is just fantasy and it's not going to help people who are financially pressed right now, and who will even more pressed as we approach Christmas Day.
The key here is timing as Black Friday (and the Cyber Monday that follows) will have some excellent prices for all types of products, ranging from software to clothing, toys and electronics, basically all goods are going to have some lower pricing on Black Friday weekend. Which means you (the consumer) will need to have the funds at that particular moment. This is why going into debt for this specific event could be meaningful.
So how does tribal lending tie in to getting a Black Friday loan? It's certainly not the best option, and unless you will be able to come up with the financing relatively quickly (meaning approximately 28 calendar days) then the loan will start to get expensive.
Let's run through a few scenarios for getting a tribally funded Black Friday loan and see how the costs play out in each example...
Situation #1 would assume that you are able to borrow from Mobiloans. I like this company a lot because they have really flexible ways to borrow since they are a line of credit issuer rather than just offering traditional one and done loans. The problem is that Mobiloans only does business in about 30 states these days so there is a good chance that you will not qualify automatically, simply based on the state that you live in. If you do qualify for Mobiloans then I would definitely say head over to their site and check them out. Make sure if you get a loan you borrow at least $500 because that will set you up to have the 10% bi-weekly interest rate, if you borrow less than $500 then you'll be looking at a 15% bi-weekly rate.
Assuming you took out $700 in a loan and kept the loan open for 42 days (which is three pay cycles, meaning three payments to the lender) then you would have $700 x 10% = $70 x 3 payment cycles = $210 in finance charges. So this is a potential scenario where if you could purchase all your Christmas gifts for $700 then you ultimately pay an additional $210 to get the funds to make those purchases on Black Friday, and make the full repayment by the 42nd day after you borrowed the money.
Another question is will you save at least $210 in the reduced pricing of your purchases. If you spend $700 on items that are marked down 50% then you will come out ahead.
Let's look at Scenario #2 where we can pretend to get a loan from Spotloan. One really good thing about Spotloan is they do not just provide a cookie cutter solution. For instance, most tribal (and state registered) lenders will offer a loan that begins on a certain date and must be repaid (or partially repaid) on another hard date. Spotloan is nice because they are more flexible. If you need a longer lead time to begin your repayments they can stretch out that initial repayment. Spotloan also assigns an account manager to work with you so you don't have to just call into the customer service phone number but instead can call your personal contact at the company. Spotloan will have higher interest rates though, when compared to Mobiloans, but they offer this longer term flexibility which can be valuable.
Assuming you took out a $700 loan via Spotloan at a 30% bi-weekly interest rate it would be a costly loan. However, in this case let's also assume that you negotiated an extra two weeks to begin repaying the debt. So the loan would run 28 days without any interest payment (any cost) and in this example the consumer would make two repayments, once after 28 days of being in debt and then again after another 14 days.
In this arrangement we would have $700 x 30% = $210 x 2 repayment periods = $420 in total finance charges. Obviously in the case of Spotloan in would be good to negotiate a longer time frame to begin paying off the debt or to try to get a 20% bi-weekly interest rate.
Both of these situations show us that getting a Black Friday loan is going to be expensive. But we can balance the cost of the loan (the finance charges) against the value the savings we would get by making our purchases when products are theoretically being marked down at deep discounts. Can we assume Black Friday purchases are marked down at least 20% and potentially as high as 60% off normal pricing? Somewhere inside the percentage of discount is where we can find the value of taking out one of these high interest loans, as we compare the finance charge to the savings we achieve with our purchases.
Another concept here is that being able to buy gifts for Christmas may have a value that is beyond money. Sometimes being able to provide a gift to children, or that special person, can carry a "value" that is more than any amount of money. And if Black Friday provides the best opportunity to procure those gifts then this might be the right time.
Whether it turns out to be $210 or $420 in financing costs the question is simple, is this cost to your budget worth the money to have a "good" Christmas or give the gifts you truly want to give? For many people the answer will be a resounding yes.