Month: March 2019

Will ‘installment loans’ be the new payday loans?

For payday lenders, installment loans could soon become the new norm, due to proposed government regulations that would break the whip on payday debt debts. Under the existing model, a credit check is not required and the lender simply confirms that you have a fixed source of income before you approve your credit application. Extension date extensions are available for an additional fee. (See for more How termJoe Gargeryening works .)

As part of efforts to end costly payday loan payouts, the Consumer Protection Agency (CFPB) proposed a rule in June that would tighten the qualification criteria and minimize the costs incurred by borrowers. The CFPB says: “The proposed rule would require lenders to determine whether borrowers can afford to repay their loans. The proposed rule would also complete repeated debit attempts that increase fees and make it harder for consumers to get out of debt “In essence, these new safeguards would radically change the way payday providers do business and pose a serious threat to their business results.

Why the shift to installment loan?

money, installment loan

In early August, the Wall Street Journal reported a 78% increase from 2014 to 2015 in the amount of money borrowed as installment loans to borrowers with credit scores of 660 or less. Amounted to no less than $ 24.2 billion in 2015 – almost three times the amount borrowed in 2012, the article adds. Why the steep rise?

Simply put, payday lenders hope to avoid threats caused by the new CFPB rules by replacing traditional payday loans with installment loans. Their defense is that installment loans minimize the need to submit an extension because the borrower can repay the loan over time. However, this does not necessarily mean that payday credits are a more affordable option for consumers.

Is the payment model safer?

payday loan

It is possible that the CFPB has good intentions with this new proposed protection, but that borrowers may experience even more problems with the new model. “The prospect of harmful loans would continue to exist because the proposed rule would allow lenders to charge any rate and set almost any term as long as they make a” reasonable determination “that the borrower can repay the loan,” says the Pew Charitable Trusts. And the higher the interest, the longer the principal remains untouched.

According to the CFPB, payday loans are on average accompanied by an interest rate of more than 300%. To make matters worse, the borrower should also focus on lending and refinancing loans, which is around 10% of the loan amount, notes the Wall Street Journal. In addition, borrowers can get the luxury of a cheaper monthly payment, but the total amount that is waived to meet the loan will be Joe Gargeryijk because of the longer repayment period. To eradicate the problem, the Pew Charitable Trusts recommends that it CFPB changes proposed regulations to “include pro-consumer product safety standards, such as limiting loan payments to 5% of a borrower’s salary.”

The bottom line

The bottom line

Despite the efforts of the CFP to curb abusive practices in payday payments by proposing stricter screening requirements, money-borrower borrowers can run even greater risks. Although an installment loan requires more time to extend the repayment period, it is also more expensive because payday borrowers are still free to assess astronomical interest rates and would extend over a longer period. (For more, see The best alternatives to payday loans and Beware of guaranteed websites with payday loans .)

How a secured loan can leverage your business

It is not easy to boost your own business when the company is out of cash working capital. At this time, relying on banks can be compromising as they charge high interest. However, there is a low interest alternative that is getting more and more popular among entrepreneurs, the secured loan.

This modality also known as refinancing, since it allows you to exchange expensive debts for another much cheaper one. In addition, it is a way of concentrating multiple debits in a single installment.

Why hire?

  • How Guarantee Loans Work
  • Can I lose good?
  • Can I sell or buy an alienated good?
  • How to hire
  • Where to hire

P or why hire?

There are several reasons and advantages for you to apply for a secured loan and leverage your company.

Starting a Business: If you’re out of money to start a business venture, you can hire low-interest credit and then pay your own profit.

Anticipate receivables: Do you know the situation in which the company sells in the long term, but do you need cash cash? It is possible to advance the value of these installments with a loan. Then you can pay off the debt with the amount received from the client.

Balance cash flow and increase working capital: the resource can help balance how much you get in and how much money out of your business, that is, balances expenses and earnings if there are more expenses than profits. In addition to being an alternative to increase working capital – all amounts used in all operations of the company, from paying salaries and suppliers until you have a reservation for any emergency. This ensures the financial health of the company and is a key step to succeed.

Reforming the company: Generally, a reform demands high amounts and often takes years to person to gather the money needed. With the loan you do it right away and you are slowly taking small installments. This is a good opportunity to invest in new equipment and products.

How Guarantee Loans Work

As the name says, in the secured loan it is necessary to link a good to the contract. It could be a real estate or a car.

It is a way to demonstrate to the financial institution that the operation is low risk . That is, the probability of default is very small, since the client is committed to paying the installments on time.

On the other hand, the financial institution relays customer security and therefore offers much lower interest rates than other loan modalities. In addition, you can also grant longer installment terms.

In technical terms, this procedure is called fiduciary alienation . In which, the indirect possession of a property is transferred to a financial institution in exchange for a loan.

This means that the asset is tied to the institution until you have finished paying all the installments. In the meantime, the owner can usu- ally enjoy the good; living, renting and driving.

Loan limit

The amount released on the loan is defined by the LTV (Loan-To-Value) . This is a calculation that takes into account the customer’s credit analysis and the value of the asset.

Therefore, in order to arrive at this amount it is necessary to analyze the client’s financial situation and make an assessment of the property or car.

To get an idea, the loan with guarantee of property is possible to get up to 60% of the value of the property. In the car loan, you can get up to 90%.

Can I lose good?

This can happen in cases of default . Therefore, it is very important to do a financial planning before hiring.

However, it is not common, precisely because a careful analysis is made to ensure that the client can afford the parcels. The company will make sure the operation is safe for both parties.

It is also important to note that taking the good is the last alternative and is not immediate. There is a procedure followed before you get into this situation.

First, the billing area will contact the debtor. Initially, one seeks to understand and negotiate the situation. If there is any difficulty, it is advantageous for both parties to enter into an agreement for the payment of the remaining installments.

If the possibilities have been exhausted and the client remains in default, the company will send a statement to formalize the beginning of the process. The debtor will still have the opportunity to reverse the situation as the stock runs.

Can I sell or buy an alienated good?

The fiduciary alienation does not prevent the owner from enjoying the property as he wishes, since it continues with direct possession. But to sell, one of the parties involved in the negotiation needs to pay off the debt with the lender. Only after that the property ceases to be a guarantee and can be sold.

How to hire

How to hire

The times of facing queues at agencies and wasting time to apply for a loan were already. Today, you can do much of the process over the internet in a more practical and cost-effective way. See how each step works until you have the money released into the account.

Step by step

Check out the steps to get the money in your account:

  1. Request: First, you can make an online simulation, customized according to the value you need and the value of the asset. Then just apply for the loan by filling out a registration form with some basic information used in the next step.
  2. Credit analysis: In this step, the interest rate, the total value of the loan and the installment, are determined by means of an analysis of your financial situation. Here it is also evaluated if it is possible to lend the desired amount.
  3. Legal analysis and evaluation of the asset: your documents undergo a verification and screening. At the same time, the asset is valued and then becomes the payment guarantee.
  4. Signing of the contract: after everything is approved, the loan formalization document is released for signature.

Once the contract is delivered to the lending company, the credit is released into the account.

It is worth noting that the process may be a bit more time-consuming than other credit lines, but the wait is worth it. This is because interest rates are considerably much lower than other loan modalities. You have access to the best payment terms.

Remembering that having the documentation up-to-date and delivering it quickly helps speed up the process as a whole.