I was doing a search for a specific keyword and I found that advertiser are paying for the search term "ten dollar payday loan". Not knowing what that was, I did a google search and I found something very interesting.
There are companies that advertise as being a guaranteed low-cost payday loan option, and they charge only $10 per $100 borrowed. They also proudly advertise their Annual APR as being ONLY 260.7%!.
Apparently there are companies that charge up to $30 per $100 borrowed, which is 3 times the APR, or over 750%!! Talk about gross margins! In any small business, you want to have the highest margins on your products. Getting several hundred percent is phenomenal.
You can get a small business loan for less than 15% in the current economic environment. If you can lend it out at 260-750%, you're sure to be profitable. Maybe I should start a check cashing or payday loan business myself!
Wednesday, July 2, 2008
Sunday, June 29, 2008
Using Credit Cards With Cash Back Rewards
There are numerous credit cards that offer cash back rewards. No, I'm not talking about cash advances on your credit cards. These usually carry an upfront fee of 3-5% and immediately start accruing interest at the highest rate, usually 27-36%. I'm not a big fan of cash advances on your credit card, although compared to payday loans, they sure can seem like a bargain!
I'm talking about using your credit card to purchase something that you'd buy anyway, and getting 2-5% cash back as a reward for using your credit card. Certain cards offer upto 5% cashback for gas purchases. With gas prices ranging close to $5/gallon where I live and rumored to hit $8/gallon by summer, getting 5% cashback is pretty darn good. If you spend $50/week on gas, using a cash rebate card can get you $130 cash back at the end of a year. Its not a lot, but its better than nothing!
My favorite cash back card is the Discover® Open Road Card (link goes direct to application).
You get 5% back on all gas and automotive purchases.
Another one of my favorite cards is my Discover® Business Card
, which give me 5% back on all my office supplies. That card gives 2% cash back on Gas and 1% on everything else, so I only use it for office supplies.
But the card that gets the most usage is my
TrueEarnings® Card from Costco and American Express. It gives 3% cash back on travel related purchases like tickets, 2% on food and 1% on everything else. By getting the right cards, its easy to an extra $500/year!
Whats in your wallet ;-)
I'm talking about using your credit card to purchase something that you'd buy anyway, and getting 2-5% cash back as a reward for using your credit card. Certain cards offer upto 5% cashback for gas purchases. With gas prices ranging close to $5/gallon where I live and rumored to hit $8/gallon by summer, getting 5% cashback is pretty darn good. If you spend $50/week on gas, using a cash rebate card can get you $130 cash back at the end of a year. Its not a lot, but its better than nothing!
My favorite cash back card is the Discover® Open Road Card (link goes direct to application).
Another one of my favorite cards is my Discover® Business Card
But the card that gets the most usage is my
TrueEarnings® Card from Costco and American Express. It gives 3% cash back on travel related purchases like tickets, 2% on food and 1% on everything else. By getting the right cards, its easy to an extra $500/year!
Whats in your wallet ;-)
Friday, May 30, 2008
No Credit Check Fast Cash Loans - No Faxing Required And No Credit Check
If you have terrible credit, you likely know how difficult it is to get approved for a personal loan. In fact, many people with good credit cannot acquire a personal bank loan. Fortunately, there are other options for getting quick cash. Cash advance lenders approve loans for all people regardless of credit and income.
How to Qualify for a Cash Loan?
Qualifying for a cash advance personal loan is simple. The majority of banks and credit unions will not approve a loan request without a credit check and collateral. Hence, it is impossible for some people to get extra funds. Moreover, unless an applicant has a vehicle title or owns a home, getting approved is equally hard.
Payday or cash advance loans make the loan process simpler. If you need extra cash, completing an online application may get you approved for up to $1500 in minutes. The money can be used to pay an unexpected expense.
Cash advance lenders have easy requirements. Naturally, loan applicants must be employed. Secondly, applicants must meet the minimum monthly salary. If an applicant earns a small salary, the likelihood of the loan defaulting is higher.
Additional requirements include having a valid checking or savings account. Applicants must be at least 18-years-old and have no previous outstanding cash advance balances. Payday loan companies do not perform credit checks. Hence, you may obtain a sizeable short-term loan with bad credit, no credit, recent bankruptcy, foreclosure, etc.
Convenience of a No-Fax Cash Advance Loan
There are two types of cash advance lenders. Those who require fax copies of documentations, and lenders that do not require faxing. If choosing a lender that requires fax copies of banking information, paycheck stubs, and driver's license, applicants must forward this information before the loan is approved.
During an emergency, faxing is a huge inconvenience. Instead, select a no-fax cash advance lender. The lender will verify employer and banking information. After information is confirmed, the cash advance is deposited into your banking account. Loan approval notifications are received in minutes. You can expect funds deposited by the next business day. In some instances, funds are received within an hour.
How to Qualify for a Cash Loan?
Qualifying for a cash advance personal loan is simple. The majority of banks and credit unions will not approve a loan request without a credit check and collateral. Hence, it is impossible for some people to get extra funds. Moreover, unless an applicant has a vehicle title or owns a home, getting approved is equally hard.
Payday or cash advance loans make the loan process simpler. If you need extra cash, completing an online application may get you approved for up to $1500 in minutes. The money can be used to pay an unexpected expense.
Cash advance lenders have easy requirements. Naturally, loan applicants must be employed. Secondly, applicants must meet the minimum monthly salary. If an applicant earns a small salary, the likelihood of the loan defaulting is higher.
Additional requirements include having a valid checking or savings account. Applicants must be at least 18-years-old and have no previous outstanding cash advance balances. Payday loan companies do not perform credit checks. Hence, you may obtain a sizeable short-term loan with bad credit, no credit, recent bankruptcy, foreclosure, etc.
Convenience of a No-Fax Cash Advance Loan
There are two types of cash advance lenders. Those who require fax copies of documentations, and lenders that do not require faxing. If choosing a lender that requires fax copies of banking information, paycheck stubs, and driver's license, applicants must forward this information before the loan is approved.
During an emergency, faxing is a huge inconvenience. Instead, select a no-fax cash advance lender. The lender will verify employer and banking information. After information is confirmed, the cash advance is deposited into your banking account. Loan approval notifications are received in minutes. You can expect funds deposited by the next business day. In some instances, funds are received within an hour.
Wednesday, May 7, 2008
Ban payday loans? Big mistake.
Washington - Fed up with politicians incapable of balancing budgets? Well, now state legislatures across the country want to take a crack at balancing your checkbook – whether you like it or not.
Paternalism – the idea that government must take care of adults because they aren't able to do so themselves – is the ideology behind the wave of politicians determined to limit how much and how often Americans can borrow money. By putting stringent restrictions on borrowing, these politicians would effectively ban the practice of short-term "payday" lending, no matter how many people use it responsibly in times of crisis.
For those who enjoy access to high lines of credit, these short-term loans – which essentially let customers borrow cash from their next paycheck – may be a bad deal. But many of the less prosperous don't have such attractive alternatives to the kind of loans that politicians like to demonize.
So when Democratic presidential candidates Barack Obama and Hillary Rodham Clinton prey on people's emotions by calling short-term lending "abusive" and "predatory," the result of their actions will be leaving low-income borrowers stranded in debt.
Most financial institutions aren't willing to cover the risk that these loans incur, so real alternatives don't exist. Why is that the case? Consider this scenario.
In some states, lawmakers have tried to pretend that they're not banning the service, only capping its price at a "reasonable level." If a complete stranger walked up to you on the street and asked you for a $100 loan and promised to pay it back in two weeks, but only give you $1.38 for your troubles – would that be a "reasonable" deal? Of course not. And no business could survive making these kinds of loans.
In fact, after Washington set a 24 percent cap on interest rates last fall, payday lenders left the city in droves, leaving consumers hard-pressed to get cash in a pinch.
So once the paternalistic rhetoric is switched off, payday lending's usefulness to borrowers in tight spots is fairly easy to understand. The quick cash means that the car gets an urgent repair, a critical check doesn't bounce, or the heating bill gets paid. Used responsibly, payday lending can help a borrower stave off financial calamity.
And it's that idea of responsibility that the activists and lawmakers trying to kill payday lending can't get their heads around. Personal responsibility is what makes adult life possible. Take something away because a small minority of adults can't use it responsibly and you treat everyone like children.
The injury on top of the insult is that laws against payday lending do serious economic harm to the people likeliest to use such a service, as confirmed by multiple teams of researchers.
One consequence of payday lending restrictions is that they force would-be borrowers into alternatives that are far more costly. Georgia, for example, has outlawed the practice – mistakenly, as a Federal Reserve Bank of New York study indicates.
The study found that bounced-check fees grew by $36 million and Chapter 7 bankruptcy filings rose by almost 9 percent in Georgia after payday lending was banned. What's worse: Bouncing checks and wrecking your credit rating, or paying a lender $15 for a $100 advance on your paycheck?
Given these facts, it's clear that those guilty of exploitation are not the short-term lenders, but politicians who are trotting out the poor to score a political victory.
The message sent by lawmakers who want to ban payday lending is to declare that consumers capable of opening a checking account and earning a paycheck can't act like adults when it comes to managing a three-figure loan. This lesson from government will only erode personal responsibility, to the detriment of a healthy society.
Americans don't need their money managed by paternalist politicians. Government should instead trust that, when given personal freedom and the maximum amount of options, consumers can decide how to responsibly use their money themselves.
• Tim Miller is the communications director at the Center for Consumer Freedom, a nonprofit organization devoted to promoting personal responsibility and protecting consumer choices.
Paternalism – the idea that government must take care of adults because they aren't able to do so themselves – is the ideology behind the wave of politicians determined to limit how much and how often Americans can borrow money. By putting stringent restrictions on borrowing, these politicians would effectively ban the practice of short-term "payday" lending, no matter how many people use it responsibly in times of crisis.
For those who enjoy access to high lines of credit, these short-term loans – which essentially let customers borrow cash from their next paycheck – may be a bad deal. But many of the less prosperous don't have such attractive alternatives to the kind of loans that politicians like to demonize.
So when Democratic presidential candidates Barack Obama and Hillary Rodham Clinton prey on people's emotions by calling short-term lending "abusive" and "predatory," the result of their actions will be leaving low-income borrowers stranded in debt.
Most financial institutions aren't willing to cover the risk that these loans incur, so real alternatives don't exist. Why is that the case? Consider this scenario.
In some states, lawmakers have tried to pretend that they're not banning the service, only capping its price at a "reasonable level." If a complete stranger walked up to you on the street and asked you for a $100 loan and promised to pay it back in two weeks, but only give you $1.38 for your troubles – would that be a "reasonable" deal? Of course not. And no business could survive making these kinds of loans.
In fact, after Washington set a 24 percent cap on interest rates last fall, payday lenders left the city in droves, leaving consumers hard-pressed to get cash in a pinch.
So once the paternalistic rhetoric is switched off, payday lending's usefulness to borrowers in tight spots is fairly easy to understand. The quick cash means that the car gets an urgent repair, a critical check doesn't bounce, or the heating bill gets paid. Used responsibly, payday lending can help a borrower stave off financial calamity.
And it's that idea of responsibility that the activists and lawmakers trying to kill payday lending can't get their heads around. Personal responsibility is what makes adult life possible. Take something away because a small minority of adults can't use it responsibly and you treat everyone like children.
The injury on top of the insult is that laws against payday lending do serious economic harm to the people likeliest to use such a service, as confirmed by multiple teams of researchers.
One consequence of payday lending restrictions is that they force would-be borrowers into alternatives that are far more costly. Georgia, for example, has outlawed the practice – mistakenly, as a Federal Reserve Bank of New York study indicates.
The study found that bounced-check fees grew by $36 million and Chapter 7 bankruptcy filings rose by almost 9 percent in Georgia after payday lending was banned. What's worse: Bouncing checks and wrecking your credit rating, or paying a lender $15 for a $100 advance on your paycheck?
Given these facts, it's clear that those guilty of exploitation are not the short-term lenders, but politicians who are trotting out the poor to score a political victory.
The message sent by lawmakers who want to ban payday lending is to declare that consumers capable of opening a checking account and earning a paycheck can't act like adults when it comes to managing a three-figure loan. This lesson from government will only erode personal responsibility, to the detriment of a healthy society.
Americans don't need their money managed by paternalist politicians. Government should instead trust that, when given personal freedom and the maximum amount of options, consumers can decide how to responsibly use their money themselves.
• Tim Miller is the communications director at the Center for Consumer Freedom, a nonprofit organization devoted to promoting personal responsibility and protecting consumer choices.
Monday, April 21, 2008
Payday loans no faxing: instant money without doing hard work
If you are feeling money problem right now and you need urgent money to do your work then payday loans no faxing is the right choice for you this time. With no need to collect papers for faxing them to your lenders, for verify the details. These are instant online payday loans and easy way to receive the money for those who are facing the problems for urgent cash.
These days television, radio, internet websites are the main way to advertise for fax less payday loans and even emails. They allow you to borrow money in a silence and judicious manner.
You have no need to step out from your house to visit paycheck lending store and no need to meet the any person to enquire about the any schemes and plans which are offered by paycheck lenders. For these loans you do not need to make any call or phone. You can find everything about these loans through internet. Please search on internet for online payday loans, after searching about online payday loans on internet you can find many paycheck lending companies, for studying their rates and terms.
There are much more competition between paycheck lending companies for fax less payday loans this time and this healthy competition are very beneficial for borrowers.
You can easily find the beneficial company for you. No fax payday loans are easily available on internet and really these are very simple way to apply indeed for an urgent need of cash.
The criteria for approved these loans are very simple and straight. You have no need to arrange any documents to prove anything about you. For these loans you should be over 18 years of age and you should be employee of any reputated firms or company for last 4 months at least. You should have an active account in any bank.
You do not need to do any paper works for verification. Your verification will be approved via online or telephone and also no credit check require for these loans. So these loans are very helpful for bed credit history persons also and you do not waste a time for this. So you have no need to spend your time to arrange any collateral documents or either.
These days television, radio, internet websites are the main way to advertise for fax less payday loans and even emails. They allow you to borrow money in a silence and judicious manner.
You have no need to step out from your house to visit paycheck lending store and no need to meet the any person to enquire about the any schemes and plans which are offered by paycheck lenders. For these loans you do not need to make any call or phone. You can find everything about these loans through internet. Please search on internet for online payday loans, after searching about online payday loans on internet you can find many paycheck lending companies, for studying their rates and terms.
There are much more competition between paycheck lending companies for fax less payday loans this time and this healthy competition are very beneficial for borrowers.
You can easily find the beneficial company for you. No fax payday loans are easily available on internet and really these are very simple way to apply indeed for an urgent need of cash.
The criteria for approved these loans are very simple and straight. You have no need to arrange any documents to prove anything about you. For these loans you should be over 18 years of age and you should be employee of any reputated firms or company for last 4 months at least. You should have an active account in any bank.
You do not need to do any paper works for verification. Your verification will be approved via online or telephone and also no credit check require for these loans. So these loans are very helpful for bed credit history persons also and you do not waste a time for this. So you have no need to spend your time to arrange any collateral documents or either.
Monday, April 7, 2008
When Are Payday Loan Business Like Banks?
Here's a riddle for you:
Q: When are payday loan businesses like banks?
A: When they're useless!
Ten years ago I found myself in a situation where I needed a small loan. It wasn't lot, about $1200. I was in college and landed a job that required me to commute 100 miles a day. Living in Los Angeles at the time, there was absolutely no way means of public transportation. I found a decent car from a rather fashionable chap in West Hollywood that I could've paid off with my first biweekly salary. However, I didn't currently have a job and the bank wouldn't loan me the money since I didn't have a paystub yet. And I wouldn't get a paystub if I didn't get that car, so it was a catch-22 situation.
Payday loan businesses, also called check cashing or cash advance businesses work in a similar manner. They offer high-interest loans to people who can't get a loan elsewhere solely based on their ability to get the next pay check. No pay stub usually means no loan.
Luckily, my college's credit union came through and they gave me the loan, although it was at a whopping 18%. So are credit unions like payday loan businesses, or are the payday loan businesses like credit unions?
Q: When are payday loan businesses like banks?
A: When they're useless!
Ten years ago I found myself in a situation where I needed a small loan. It wasn't lot, about $1200. I was in college and landed a job that required me to commute 100 miles a day. Living in Los Angeles at the time, there was absolutely no way means of public transportation. I found a decent car from a rather fashionable chap in West Hollywood that I could've paid off with my first biweekly salary. However, I didn't currently have a job and the bank wouldn't loan me the money since I didn't have a paystub yet. And I wouldn't get a paystub if I didn't get that car, so it was a catch-22 situation.
Payday loan businesses, also called check cashing or cash advance businesses work in a similar manner. They offer high-interest loans to people who can't get a loan elsewhere solely based on their ability to get the next pay check. No pay stub usually means no loan.
Luckily, my college's credit union came through and they gave me the loan, although it was at a whopping 18%. So are credit unions like payday loan businesses, or are the payday loan businesses like credit unions?
What Are Installment Payday Loans
I had heard of Installment Loans, but I wasn't sure what Installment Payday Loans were.
An installment loan is a multi-month loan, with fixed equal payments, spread out over a fixed amount of time. Kind of like a car loan or maybe even a mortgage.
So do these check cashing businesses have similar payday loans where the money is returned in installments? Often times, payday loans are due with a short duration. If the borrower is a few days late on the repayment of the loan, it can technically go into default and subject the borrower to additional fees and penalties. The ability to pay back a loan over a longer duration can save the borrower a significant amount of money, even if the initial rate is slightly higher.
These programs do in fact exist. And their interest rate is higher than the typical payday loan. But the ability to split the repayment over a longer duration makes it easier on the borrower and actually decreases the rate of default. A regular payday loan usually has processing fees of around $30 attached to it and is typically for around $300. This makes the processing fee a whopping 10% on average, of the money borrowed. Having to recycle this loan a few times with additional penalties can easily make the effective interest rate to be over 200% on an annualized basis. No wonder having an installment payday loan makes sense. Just avoiding the processing fee a few times might reduce the the interest rate by over 50%. Makes the 30% seem like a bargain!
An installment loan is a multi-month loan, with fixed equal payments, spread out over a fixed amount of time. Kind of like a car loan or maybe even a mortgage.
So do these check cashing businesses have similar payday loans where the money is returned in installments? Often times, payday loans are due with a short duration. If the borrower is a few days late on the repayment of the loan, it can technically go into default and subject the borrower to additional fees and penalties. The ability to pay back a loan over a longer duration can save the borrower a significant amount of money, even if the initial rate is slightly higher.
These programs do in fact exist. And their interest rate is higher than the typical payday loan. But the ability to split the repayment over a longer duration makes it easier on the borrower and actually decreases the rate of default. A regular payday loan usually has processing fees of around $30 attached to it and is typically for around $300. This makes the processing fee a whopping 10% on average, of the money borrowed. Having to recycle this loan a few times with additional penalties can easily make the effective interest rate to be over 200% on an annualized basis. No wonder having an installment payday loan makes sense. Just avoiding the processing fee a few times might reduce the the interest rate by over 50%. Makes the 30% seem like a bargain!
Tuesday, March 18, 2008
The Advantages Of An Emergency Fund
You never know an emergency can occur. And when it does, you don't want to be struggling to find cash. You want to be able to reach into your emergency fund and pull out a few thousand dollars at a moments notice.
A few weeks ago, my wife wrecked her car. This seems to be a regular occurance, every 36 months. I found out several years ago that having a low deductible on your insurance isn't cost-effective. Your annual auto premiums are much higher, and if you don't have an accident every other year, you'll eventually end up paying more in premiums than you would have for the deductible.
Based on that premise, I've set the premiums for collision on our auto-policy at $1000. Since the accident was judged to be no one's fault (of course, it's hard to believe that my wife couldn't see a 30 foot truck and sideswiped it), we liable for our $1000 deductible. Oh no!
So I dropped off the car in the body shop and picked up a rental for my wife. About a week later, I got into an accident, which I admit, was completely my fault. I've been driving for 15 years and this was the first accident I've been in. I was day-dreaming. Sadly, that another $1000 for the deductible. $2,000 down the drain!
In all, we're facing $2000 worth of unexpected expenses in the past 30 days. If we didn't have a large emergency fund, we'd be strapped for cash. Pretty much like those poor people who need access to payday loans. You need money in an emergency and then you get sucked into those loans. Of course, if you're smart you'll borrow money on Prosper instead of getting a payday loan. It's always a good idea to have a couple of months worth of living expenses handy in case of emergencies!
Even if that means postponing your big-screen TV or ATV purchase! Fund your emergency account first!
A few weeks ago, my wife wrecked her car. This seems to be a regular occurance, every 36 months. I found out several years ago that having a low deductible on your insurance isn't cost-effective. Your annual auto premiums are much higher, and if you don't have an accident every other year, you'll eventually end up paying more in premiums than you would have for the deductible.
Based on that premise, I've set the premiums for collision on our auto-policy at $1000. Since the accident was judged to be no one's fault (of course, it's hard to believe that my wife couldn't see a 30 foot truck and sideswiped it), we liable for our $1000 deductible. Oh no!
So I dropped off the car in the body shop and picked up a rental for my wife. About a week later, I got into an accident, which I admit, was completely my fault. I've been driving for 15 years and this was the first accident I've been in. I was day-dreaming. Sadly, that another $1000 for the deductible. $2,000 down the drain!
In all, we're facing $2000 worth of unexpected expenses in the past 30 days. If we didn't have a large emergency fund, we'd be strapped for cash. Pretty much like those poor people who need access to payday loans. You need money in an emergency and then you get sucked into those loans. Of course, if you're smart you'll borrow money on Prosper instead of getting a payday loan. It's always a good idea to have a couple of months worth of living expenses handy in case of emergencies!
Even if that means postponing your big-screen TV or ATV purchase! Fund your emergency account first!
Wednesday, February 13, 2008
Payday Lending: Good Or Evil
There's been a lot of discussion on whether payday loans are good or evil. Most people (regardless of whether they actually use them or not) think they prey on weaker sections of society. The businesses, of course, claim they offer a service to under served communities.
According to a great research article written by the renowned economic institution, The Mises Institute, payday loans are definitely evil.
However, they also suggest a solution:
There you have it. Payday loans are evil and you should try and avoid them. But even though they are bad, there's a way to make them less bad. The article also explains why pay day loan businesses need to charge so much and once you realize this, you understand why they effectively make only a 30% return on their money.
You can read the entire article here.
What's your opinion on payday loans?
According to a great research article written by the renowned economic institution, The Mises Institute, payday loans are definitely evil.
The Center for Responsible Lending concludes payday lending is a predatory business in that it lures borrowers into a "debt trap." The problem, the Center says, is this: borrowers take out short-term loans with high interest rates and transaction costs. The costs are so burdensome that borrowers soon find they need additional loans. This cycle traps borrowers in a situation of revolving high-priced, short-term credit. The Center’s study estimates conservatively that borrowers spend $3.4 billion dollars annually in lending fees.
However, they also suggest a solution:
Short of banning payday lending altogether, the Center advocates that payday lending companies be permitted to advance no more than 4 loans per customer per year and that these loans have 90-day terms (instead of 14-30 day terms). In this way, spendthrift borrowers are prevented from abusing the service and falling into the trap of revolving credit.
There you have it. Payday loans are evil and you should try and avoid them. But even though they are bad, there's a way to make them less bad. The article also explains why pay day loan businesses need to charge so much and once you realize this, you understand why they effectively make only a 30% return on their money.
You can read the entire article here.
What's your opinion on payday loans?
Are Payday Loan Customers Ignorant?
The common belief is that payday loan borrowers are somehow ignorant of the true costs of the loan. While their may be some truth that they belong to the economically dis-advantaged sections of society, they may not necessarily be completely dumb.
Most of them take out a loan to pay for emergencies. If you need your car repaired, without which you can't get to work, paying 50-250% an annual interest seems like a necessary expense. In fact, if its only $250, and you expect to be able to pay it off in a week, paying an extra $60 might even seem like a bargain. Especially if the borrower has the potential to work over-time to pay it off.
Borrowers get into trouble when they borrow more than they can afford to pay back within a short period of time. Thats when these cash advance loans can eat you alive.
In fact, there are hundreds of borrowers on Prosper.com who are willing to pay 30% interest, just to get out of 100-200% interest loans. For borrowers, this is particularly attractive. Where else can you earn a 30% return on your money?
Of course, the best investment is start a payday loan business, but that is incredibly capital intensive than lending money on Prosper.
Most of them take out a loan to pay for emergencies. If you need your car repaired, without which you can't get to work, paying 50-250% an annual interest seems like a necessary expense. In fact, if its only $250, and you expect to be able to pay it off in a week, paying an extra $60 might even seem like a bargain. Especially if the borrower has the potential to work over-time to pay it off.
Borrowers get into trouble when they borrow more than they can afford to pay back within a short period of time. Thats when these cash advance loans can eat you alive.
In fact, there are hundreds of borrowers on Prosper.com who are willing to pay 30% interest, just to get out of 100-200% interest loans. For borrowers, this is particularly attractive. Where else can you earn a 30% return on your money?
Of course, the best investment is start a payday loan business, but that is incredibly capital intensive than lending money on Prosper.
Monday, February 11, 2008
How To Start A Payday Loan Business
While researching often used terms related to payday loans I came across the term "how to start a payday loan business". While its not very popular (its searched for roughly a dozen times a day), the search term returns nearly 9,000 pages on google!
While the first 2 links seem legitimate sites to the same company offering a $300 how-to manual (which seems pretty comprehensive and claim you can make 30% return on your money), the subsequent links are spam sites from California State University at San Marcos that have invisible text (white text and white background) and links to various other pay day loan sites. Amazing how they're the 3rd link. I imagine having a .edu domain has something to do with it.
Anyway, there are two ways to get into the payday loan business. One is to start from scratch, and the other is to buy an existing business or franchise. Startup costs can be pretty high and include setting up a retail shop, office furnishings, broadband Internet, a computer and a sizable amount of cash for lending. If an existing business is purchased, the advantage is the business has a client base. The client base is important, as many of these borrowers will be repeat customers for a surprisingly long number of months. They will pay off the loan and then come back in a few months and do it again. These customers usually have a very good source of funds like a pension or some sort of structured payout.
The returns can be pretty substantial, but they are not without risk. Since no credit check is performed, its wise to make sure the borrower doesn't already have a payday loan.
Its also advisable to be cognizant of the local lending laws since any breach of these could result in severe penalties. Collecting delinquent accounts is also part of the business and the success in this area will directly affect the profit of the company.
Referrals are a great way that existing customers can help to expand your business. Giving them a financial incentive to recommend you to their friends will make getting new customers an easier proposition.
Having a location in a high foot traffic area is beneficial since you're essentially in the retail lending business. If you don't have many other attractions nearby, you will have to do much more advertising to bring in new clients.
In conclusion, stating a payday loan or cash advance business can be a profitable business if proper steps are taken to maximize success.
While the first 2 links seem legitimate sites to the same company offering a $300 how-to manual (which seems pretty comprehensive and claim you can make 30% return on your money), the subsequent links are spam sites from California State University at San Marcos that have invisible text (white text and white background) and links to various other pay day loan sites. Amazing how they're the 3rd link. I imagine having a .edu domain has something to do with it.
Anyway, there are two ways to get into the payday loan business. One is to start from scratch, and the other is to buy an existing business or franchise. Startup costs can be pretty high and include setting up a retail shop, office furnishings, broadband Internet, a computer and a sizable amount of cash for lending. If an existing business is purchased, the advantage is the business has a client base. The client base is important, as many of these borrowers will be repeat customers for a surprisingly long number of months. They will pay off the loan and then come back in a few months and do it again. These customers usually have a very good source of funds like a pension or some sort of structured payout.
The returns can be pretty substantial, but they are not without risk. Since no credit check is performed, its wise to make sure the borrower doesn't already have a payday loan.
Its also advisable to be cognizant of the local lending laws since any breach of these could result in severe penalties. Collecting delinquent accounts is also part of the business and the success in this area will directly affect the profit of the company.
Referrals are a great way that existing customers can help to expand your business. Giving them a financial incentive to recommend you to their friends will make getting new customers an easier proposition.
Having a location in a high foot traffic area is beneficial since you're essentially in the retail lending business. If you don't have many other attractions nearby, you will have to do much more advertising to bring in new clients.
In conclusion, stating a payday loan or cash advance business can be a profitable business if proper steps are taken to maximize success.
Payday loans
Payday loans are a form of subprime lending, similar to high interest rate credit cards.
Opponents claim that payday lenders are usually situated near military bases or in low-income areas and target the young and the poor, who often may not understand the time value of money. Some even compare payday lenders to loan sharks due to high interest rates; typically 250% or more when annualized. There have also been incedents where payday lenders have pursued criminal bad check charges, despite the fact that they knew the check was bad at the time when it was written. Similarly, it is argued that the interest rates on payday lending (and on rent to own purchasing) unfairly disadvantage the poor, compared to the middle class who pay at most 25% or so on their credit cards.
Defenders of the higher interest rates note that payday loan processing costs do not differ much from their higher-principal, longer-term counterparts such as home mortgages. They argue that conventional interest rates at these lower dollar amounts and shorter terms would not be profitable. For example, a $100 one-week loan, at a 20% APR (compounded weekly) would only generate 38 cents of interest, which would fail to match loan processing costs. They also argue that the interest on a payday loan is less than the costs associated with bounced checks or late credit card payments. They also argue that the interest cost accurately reflects the increased risk of default, a concept known as risk based pricing.
The best alternative for those unfortunate to get sucked into these loans is tho pay them off as soon as possible. Prosper.com offers a solution by offering the lender alternate sources of funding at reasonable rates.
Of course, the best way to avoid payday loans is to create alternate streams of income so you're never in a tight spot. Particularly useful are ways of making money online,since they provide time and geographic independence. Like this blog!
Opponents claim that payday lenders are usually situated near military bases or in low-income areas and target the young and the poor, who often may not understand the time value of money. Some even compare payday lenders to loan sharks due to high interest rates; typically 250% or more when annualized. There have also been incedents where payday lenders have pursued criminal bad check charges, despite the fact that they knew the check was bad at the time when it was written. Similarly, it is argued that the interest rates on payday lending (and on rent to own purchasing) unfairly disadvantage the poor, compared to the middle class who pay at most 25% or so on their credit cards.
Defenders of the higher interest rates note that payday loan processing costs do not differ much from their higher-principal, longer-term counterparts such as home mortgages. They argue that conventional interest rates at these lower dollar amounts and shorter terms would not be profitable. For example, a $100 one-week loan, at a 20% APR (compounded weekly) would only generate 38 cents of interest, which would fail to match loan processing costs. They also argue that the interest on a payday loan is less than the costs associated with bounced checks or late credit card payments. They also argue that the interest cost accurately reflects the increased risk of default, a concept known as risk based pricing.
The best alternative for those unfortunate to get sucked into these loans is tho pay them off as soon as possible. Prosper.com offers a solution by offering the lender alternate sources of funding at reasonable rates.
Of course, the best way to avoid payday loans is to create alternate streams of income so you're never in a tight spot. Particularly useful are ways of making money online,since they provide time and geographic independence. Like this blog!
How This Pay Day Loans Site Came About
This is an experiment to see how much traction I can gain from writing posts about Payday loans in terms of SEO ranking and Ad generation. In particular, I want to see how long it takes for this blog to achieve meaningful Google search engine ranking for payday-related search terms and organic traffic.
Payday loans are bad for people. If you stop to calculate how much percentage you pay on an annual basis for a short-term loan (usually 2 to 8 weeks in duration) it can come out to be well over 100%! They should be using micro-lending sites like Prosper.com instead.
As a lender on Prosper.com, I've lent out money to payday loan borrowers and have helped them escape the clutches of the preditary lending communities. It can be argued that the payday loan-sharks provide a valuable service to the lower section of society who are unable to get loans from any place else. However, charging upto 400% in annual interest is rather unethical and cannot be rationalized except under the pretext of pure greed.
Payday loans are bad for people. If you stop to calculate how much percentage you pay on an annual basis for a short-term loan (usually 2 to 8 weeks in duration) it can come out to be well over 100%! They should be using micro-lending sites like Prosper.com instead.
As a lender on Prosper.com, I've lent out money to payday loan borrowers and have helped them escape the clutches of the preditary lending communities. It can be argued that the payday loan-sharks provide a valuable service to the lower section of society who are unable to get loans from any place else. However, charging upto 400% in annual interest is rather unethical and cannot be rationalized except under the pretext of pure greed.
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