Finance Friday: If the Cubs Can Do It, So Can You!

FF2 (1)

As a Chicago-based company, we’re riding pretty high this week. Not only did our Cubs beat the San Francisco Giants in a miraculous come-from-behind win to advance to the NLCS, but OppLoans was also ranked on Built In Chicago’s Top 100 Digital Companies in Chicago!

So no matter what your personal finance situation is, just take some inspiration from the Cubbies. If they can break The Curse of the Billy Goat, then you can definitely get your budget under control.

Here are our top personal finance stories from this week:

It’s true! OppLoans has been ranked on the BuiltinChicago Top 100 Digital companies!

Los Angeles Times: Due to the ongoing (and ongoing and ongoing) criticism of the company in the wake of their “fake accounts” scandal, Wells Fargo CEO John Stumpf has resigned.

Wall Street Journal: The Supreme Court is set to hear an important case that could affect the future of debt collections.

TheIntercept.com: Google’s ban on payday lending ads isn’t quite going as expected.

Variety: Vice Media is launching a website entirely devoted to personal finance called Vice Money.

Chicago Tribune: Our hometown paper on the importance of new regulations to curb predatory payday lending.

GoBankingRates.com: Here’s a list of the biggest sources of debt from state to state.

Military Times: The Consumer Financial Protection Bureau has ordered Navy Federal Credit Union to pay out $23 million due to deceptive collection practices.

Upproxx.com: One of the best parts of being financially stable is the opportunity to travel. Here are some ideas for how best to save for your dream vacation.

GameRant.com: Video games used to be about evading ghosts while eating fruit in a maze. But nowadays, even living your Mafioso fantasies require sticking to a budget.

Yahoo Finance: Did you know that your fingernails and hair keep growing after you die? They do! On a somewhat related note, here’s a story about what happens to your credit score after you die.

ICYMI this week on the OppLoans blog:

OppLoans Word of the Week: Debt Snowball

4 Reasons to Avoid Cash Advances

What’s Up with Payday Loans in Kansas City?

Have a greet weekend!

If you need a loan, but you have bad credit, you should stay away from predatory payday and title lenders. Apply for a personal installment loan from OppLoans instead. If you’re approved you can get your money as early as the next business day with terms that you can afford. Making your payments on time could even help your credit score! To learn more, or to apply for a loan today, check out our homepage: OppLoans.com.

3 Ways an Installment Loan Can Help Your Credit Score

3 Ways an Installment Loan Can Help Your Credit Score

If you ever feel like your credit score is totally beyond your control (like the weather or your utterly doomed fantasy football team), then it might be time to adjust your thinking. After all, your credit score is merely a reflection of the information in your credit report, which is itself a reflection of how you handle your debt. You can’t change the stuff you did in the past to hurt your score, but there are definitely actions you can take to improve it today.

It’s possible to improve your FICO score by taking out a personal installment loan. Unlike short-term payday or title loans, an installment loan is designed to be paid off in a series of simple, manageable payments over the course of the loan’s term. Plus, your typical installment loan will come with a lower interest rate than a comparable credit card.

Here are three ways that a safe, affordable installment loan can help you improve your credit score.

1. Diversify Your Debt

When the good people at FICO are creating your credit score, they are sorting all the information on your credit report into five different categories. The two most important categories are “Payment History” (which makes up 35 percent of your score) and “Amounts Owed” (30 percent).[1]

But one of the other three categories is “Credit Mix”, which determines 10 percent of your score. “Credit Mix” refers to the different kinds of debt you owe: credit card debt, personal loan debt, student debt, auto debt, mortgage debt, etc. The more diverse your credit mix, the better your credit rating.

If you have a lot of credit card debt, taking out an installment loan to pay some of it off would also help diversify your credit mix. And that more diverse mix could help improve your credit.

Best Practices: Don’t take an installment loan just for the sake of taking one out. That would add to your total debt load and—if you fail to repay it—lower your credit rating.

2. Save You Money

You know what’s a great way to raise your credit score? Owe less debt. (Shocking, we know.) And you know what’s a great way to less debt? Score a lower interest rate. The less you’re paying in interest, the less you’ll overall—and the faster you’ll be able to pay your debt down.

First things first: if you cannot get approved for an installment loan with an equal or lower rate than your other debt (credit cards, payday loans, title loans), then it’s probably not worth it. Consolidating high-interest debt into an affordable, reliable installment loan is a great way to save money (read more in Debt Consolidation Loans – An OppLoans Q&A with Ann Logue, MBA, CFA). But if you’re going to be paying a higher interest rate? Not so much.

But scoring a lower interest rate isn’t the only way you can owe less through an installment loan. You see, the longer any piece of debt is outstanding, the more you’ll end up paying in interest overall. The shorter the loan, the less it costs. Most installment loans are structured to repaid over the course of a few years—and that’s with the borrower paying only their minimum payments. Compare that to your typical credit card: with only minimum payments, that card could take nearly a decade to pay off! That’s thousands of extra dollars in interest.

Paying less money on your debt will also help you pay down your debt fast. And the sooner you pay that debt off—or at least pay it down—the faster that change will be reflected in your credit score.

Best Practices: Most installment loans are amortizing, which means that they can save you money compared to rolling over a similar payday or title loan.

3. Improve Your Payment History

As you’ll recall, your payment history determines 35% of your score overall. This means that making your installment loan payments on time every month will go towards improving that chunk of your score. If you don’t have a great history of on-time payments, it just might help to start fresh!

Of course, that all depends on your lender actually reporting your payment information to the credit bureaus. And if you have bad credit, you might find yourself dealing with lenders who don’t report any payment information at all. This is especially true for most payday and title lenders. While many of their customers will be grateful that these lenders don’t report payment information, someone who’s looking to be responsible and improve their credit score will not.

Best Practices: Did you know that OppLoans offers personal installment loans with lower rates, longer terms and better customer service than your typical payday or title lender? Plus, we do report your payment information to credit bureaus, so taking out a loan with us could help improve your credit.

References:

  1. “What’s in my FICO Scores.” MyFICO.com. Retrieved October 4, 2016 from http://www.myfico.com/crediteducation/whatsinyourscore.aspx
  2. Konsko, L. “Will an Installment Loan Help Your Credit?” Nerdwallet. Retrieved October 4, 2016 from https://www.nerdwallet.com/blog/loans/installment-loan-boost-credit-fico-score/

Getting a Loan with Bad Credit? It’s Possible. Here’s How.

getting-a-loan-with-bad-credit

Let’s face it: Nobody likes to be judged. But when it comes to loans, it’s going to happen. Creditors are going to look deep into your credit history and make a decision about whether or not to lend to you. Lenders need to determine how risky it would be to lend money to a borrower. And if you’ve got bad credit, you might expect to be shown the door right away.

But don’t panic! Even if you have bad credit, it’s still possible to get a loan. Here’s how.

Know Your Credit Score and Know What It Means

Lenders know your credit score, and you should too. When you’re applying for a loan, that three-digit FICO score is going to play a big role in whether or not you’re approved. If you don’t know your FICO score, there are plenty of ways you can find it. You can check your credit score for free using Experian’s FreeCreditReport.com site; you can ask your bank if they provide free credit scores; you can even request one directly from FICO themselves—though they’ll make you pay for it.

So now that you know how to find your credit score, how can you improve it? Check out the OppLoans ebook Credit Workbook: The OppLoans Guide to Understanding Your Credit, Credit Report and Credit Score to learn if you have bad, fair, or good credit—and then, what you can do about it!)

When it comes to getting a personal loan, borrowers with a credit score above 720 typically pay an 11-percent interest rate. Those with subprime credit pay almost three times as much – 29 percent! For borrowers with a credit score below 550, many traditional lenders won’t offer a loan at all.

Sound Advice: Don’t despair! Borrowers with bad credit still have options like safe installment loans and certain “no credit check loans” (or “soft credit check loans”!)

Do NOT Take Out a Payday Loan

If you happen to fall into the “poor credit” category, you’ll likely find your loan application has been turned down at the bank. However, you won’t have to look far to find people, both online and on the street, advertising “quick cash” for borrowers with bad credit. Many of these are payday loans, and they are dangerous.

Payday lenders will likely give you a loan, but they’ll make you pay for it. Literally. You can expect an APR of 350 percent or more. Rates that high are how payday loans trap low income borrowers in a cycle of predatory debt.[1] So if you’re thinking about taking out a payday loan, DON’T DO IT.

Worried you might be dealing with a predatory lender? Check out the warning signs in our ebook “How to Protect Yourself From Payday Loans & Predatory Lenders“.

If Your Credit Is Bad, Build It

Here’s the truth: Bad credit can mean that you’re going to have to pay more for a loan. It’s as simple as that. However, your credit score isn’t written in stone. If your credit is currently lower than you’d like, the best thing to do is build it up before taking out a loan.

We know, it sounds daunting. Also, it’s going to take a little bit of time. But don’t worry, you can do it by following these six steps.

Sound Advice: Stay below 30 percent of your credit card limit to boost your credit score.

Consider Personal Installment Lenders

Building credit sounds great, but sometimes emergencies happen and you need funds immediately. A payday loan might be tempting, but there are better options out there.

One place to look for a bad credit loan is with personal installment lenders. A personal installment loan can used to cover emergency expenses or to consolidate higher-interest debt. These lenders consider many factors when evaluating a loan application – not just your credit score –so you’ll probably have better luck with them. Also, not to toot our own horn, but OppLoans scores 4.9/5 stars with the Better Business Bureau® based on customer reviews. Toot toot!

Opt for a Secured Loan

Secured loans are a good way for borrowers with bad credit to boost their appeal when applying for a loan. With a secured loan, a borrower offers an asset – a home or car, for instance – as collateral. It makes lenders more likely to approve a loan because they know they can take possession of the asset to cover their losses if the loan is not repaid. Just make sure you avoid short-term, high-interest title loans! They are definitely not worth the risk.

Sound Advice – Be careful when choosing collateral for a secured loan. If you default on the loan, you will lose your collateral.

Join a Credit Union

Credit unions are a good option for borrowers with bad credit. They’re like banks, but when you apply for a loan, they don’t evaluate you purely on your credit score. The trick, however, is that you have to be a member, so you have to convince them to grant you membership. They look at your financial health, but they also make a decision based on factors like where you live, where you work, or where you went to school. You can search for credit unions near you through mycreditunion.gov.

Sound Advice: Professional groups often form credit unions, so try to find one through your job.

Get a Co-Signer

Another option for borrowers with bad credit is to get a co-signer. With a co-signer, the interest rate for the loan will be calculated based on the credit rating of the person you sign with. So find someone with good credit who trusts you to repay the loan. But be careful. That person will be equally responsible for payment, so if you fall behind, they’ll suffer for it too.

Sound Advice: Cherish your co-signer. Payment information will be recorded to both of your credit reports.

At OppLoans, we believe that you deserve better than a payday loan. That’s why we offer personal installment loans with longer terms (6-36 months) and lower rates (up to 125 percent less) than your typical payday or title loan. Plus, our customers rate us an average of 4.9 out of 5 stars on Google.

Visit OppLoans on YouTube | Facebook | Twitter | LinkedIN

References:

  1. “Bulusu, Siri. “How Small Short-Term Loans Draw Vulnerable Borrowers Into Big Long-Term Debt.” Medill News Service. Accessed September 30, 2016,from http://news.medill.northwestern.edu/chicago/how-small-short-term-loans-draw-vulnerable-borrowers-into-big-long-term-debt/

Longer Terms or Lower Payments: Which Debt Consolidation Strategy is Right for You?

Longer Terms or Lower Payments (2)

Life is about choices. Do you want chocolate or vanilla, hardwood or carpet, Star Trek or Star Wars? Many times, there isn’t a “right” choice—it’s just about what you prefer. If you like the taste of chocolate better than vanilla, then chocolate is right for you. If you hate cold feet in the winter, then you should choose carpet. (This does not apply to Star Trek vs Star Wars. The correct answer is always Star Wars. Come at us, Twitter!)

The same is true when you’re choosing a loan to consolidate your debt. Any debt consolidation loan you choose will reduce the number of payments you need to make each month, but there are a lot of other factors that can impact your decision as well. And the most important choice you’ll have is between short-term relief and long-term savings. Do you want lower monthly payments, or to save money on your loan overall?

There is no “right” answer. However, there are downsides to each option that you may want to consider.

Can I Score Lower Monthly Payments and Save Money Overall?

No. Probably not. Here’s why:

The vast majority of debt consolidation loans are amortizing installment loans, which means that they come with set repayment terms. If you take out a five-year consolidation loan, you’ll be paying it off in monthly installments for the next five years. And if you take out a three-year loan, you’ll be paying it off for three (read more in What You Need to Know about Consolidation Loans).

Now, if you get the five-year loan, the amount you owe is going to be broken up into 60 monthly payments. If you get the three-year loan, that same amount of money is going to be broken up into 36 monthly payments. So by taking the five-year loan, each individual payment will be a smaller portion of the principal loan amount. The longer the payment term, the less you will pay each month. Make sense?

However, assuming that the three-year and the five-year loan both have the same annual percentage rates (APRs), the five-year loan will also be accruing interest for an additional two years. While your monthly payments will be smaller with the five-year loan, you will end up paying more overall.

The chances of finding a loan with a longer repayment term and a substantially lower interest rate are pretty much slim to nil. If you are taking out a debt consolidation loan, you are going to have to choose between lower monthly payments and paying less money overall.

So Which Strategy is Better?

It depends!

If you are someone who is struggling to afford all your monthly payments, getting a loan with lower monthly payments could give you some much-needed breathing room. You could use that extra money each month to build up your emergency savings or pay for additional necessities. Plus, you can always start paying more than your monthly minimum if your financial situation improves down the line. Either way, the benefits of temporary relief will still outweigh the long-term costs.

On the other hand, if you’re someone with a bit more breathing room in your monthly budget, getting a debt consolidation loan with shorter terms can help you save money in the long run. When you sit down and look at your long-term financial goals, spending less money on your debt will be key. Saving up for a home mortgage or for a new car means tightening your belt and finding savings wherever you can.

And you know what’s pretty great? Getting out of debt ASAP! The sooner you are debt free, the sooner you can start putting your money towards what really counts: Your future.

The Choice is Yours

As you can see, there are benefits and drawbacks to each debt consolidation strategy. But as long as you’re picking the one that’s right for you, you’re making the right choice.

If you have bad credit and need a fast, reliable loan, check out a personal loan from OppLoans. Our loans come with longer terms, lower rates, and more affordable terms than predatory payday and title loans. You can apply now from your computer, phone, or tablet. If you’re approved, we can have the money in your account as early as the next business day. To learn more, or to apply for a loan today, check out our homepage: www.OppLoans.com.

5 Need-to-Know Facts About Title Loans

If you’ve ever tried to sell your car, you may have had that dark moment when you realize how much your vehicle is actually worth. (Spoiler alert: it’s way less than you might have thought!) But even if your ’92 Geo Prism with the sweet hatchback isn’t exactly a goldmine, you could still use that car to get a pretty sizeable loan if you’re strapped for cash.

This is a major part of why car title loans seem so appealing: In exchange for handing over your car title as collateral, you can get a loan regardless of your credit score. Sounds like a great deal!

Only it’s not a great deal. In fact, it’s a terrible, “how is this even legal?” kind of deal. If you’re thinking about taking out a title loan to cover either emergency expenses or just everyday costs, these five surprising facts will make you want to steer clear!

1. Title Loans are banned in 25 states

That’s half the country, folks. Due to their short terms, lump sum repayments and high Annual Percentage Rates (APRs), title lenders are only able to operate in a handful of states.[1] And many of these states take a, shall we say, lax approach towards regulating these predatory lenders. This makes taking out a loan from one even more dangerous. So if you’re thinking about a title loan, consider that 50 percent of states have said “thanks, but no thanks” to title lenders.

2. Title Loans have an average APR of 300%

A loan’s Annual Percentage Rate, or APR, measures how much that loan would cost the borrower if it were outstanding for a full year. And with an average APR of 300 percent, your typical title loan would cost three times what you originally borrowed in fees and interest alone. Technically, these loans are only a month long, with a 25 percent monthly interest rate, but lots of people can’t afford that. Since they can’t pay their loan back on time, they keep rolling the loan over, scoring another month in exchange for an additional 25 percent (read more in Title Loans: Risk, Rollover, and Repo). Before you know it, one month has turned in 12, and that 300 percent APR is now a reality!

3. Sometimes, a “Title Loan” isn’t actually a Title Loan

Cases like these have been reported in states like Missouri[2] and Virginia, both of which allow title loans. Customers took out what they thought was a title loan, but was actually something far different. These loans can come with different names, like “consumer installment loan” or “consumer finance loan” but they come with even less regulations than title loans. They can be structured to last much longer than a conventional title loan with potentially unlimited interest.[3] Offering loans under a different statute is a classic trick by predatory lenders to skirt around state lending regulations. Don’t fall for it.

4. Over 80% of Title Loans are the result of refinancing

The majority of title loans may be short-term loans, but that doesn’t mean that lenders intend them for short-term use. According to a study published by the Consumer Financial Protection Bureau (CFPB) in May, 2016, over 80 percent of title loans are the result rollover.[4] What does that mean? It means that the title loan industry doesn’t just profit from their customers’ inability to afford their loans, they depend on it. Short-term title loans aren’t designed to be paid off in a series of small, manageable payments: They are meant to be repaid in a single lump sum. Many customers can’t afford to pay their loan off all at once, meaning they have to refinance the loan just to keep from defaulting and losing their vehicle. Speaking of which …

5. 1 in 5 Title Loan customers loses their car

When a customer cannot pay their title loan back, the lender gets to repossess their vehicle. And according to that same study from the CFPB, this is exactly what happens to one out of every five title loan customers. That’s 20 percent. If someone told you that a loan came with a 20 percent chance of losing your car, would you still sign the agreement? Heck no, you wouldn’t!

If you need a loan and need it fast, don’t fall for the promises of a predatory title lender. Choose a personal installment loan from OppLoans instead. We’re a socially responsible lender, and we believe that people deserve better than a payday or title loan. Our personal installment loans come with lower rates, longer terms, and a series of easy, manageable payments. Plus, if you are approved for a loan, we can have the funds in your checking account as early as the next business day. To learn more, or to apply for a loan today, check out our homepage: www.OppLoans.com.

References:

  1. Bourke, N., Horowitz, A., Karpekina, O., Kravitz, G., Roche, T. “Auto Title Loans: Market practices and borrowers’ experiences.” Retrieved September 12, 2016, from http://www.pewtrusts.org/~/media/assets/2015/03/autotitleloansreport.pdf?la=en
  2. Moskop, W. “TitleMax is thriving in Missouri — and repossessing thousands of cars in the process.” Retrieved September 12 from http://www.stltoday.com/business/local/titlemax-is-thriving-in-missouri-and-repossessing-thousands-of-cars/article_d8ea72b3-f687-5be4-8172-9d537ac94123.html
  3. Pope, M. “The Fast-Cash World of Virginia Car-Title Lenders.” Retrieved September 12, 2016, from http://wamu.org/news/15/10/05/inside_the_fast_cash_world_of_virginia_car_title_lenders
  4. “Single-Payment Vehicle Title Lending.” Retrieved September 12, 2016, from  http://files.consumerfinance.gov/f/documents/201605_cfpb_single-payment-vehicle-title-lending.pdf

Bad Credit Checkup: 6 Steps to a Healthy FICO

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When people get a cold, their doctor’s advice is usually pretty straightforward: Take some medicine, drink fluids, and get lots of rest. If you had a cold and your doctor recommended that you stand on your head and yodel, you’d think she was crazy. Sometimes the simple, straightforward answers are the best ones.

The same holds true for your credit score. If you have bad credit and are looking to improve it, the answers are pretty simple. We don’t have any #hacks for you, just best practices. While it is possible to improve your FICO score quickly, it’s not really achievable for most people. (Pay off all my credit cards right now and my score will skyrocket? Why didn’t I think of that before?!)

If you have bad credit and want to improve your credit score, here are the doctor’s orders …

1. Get a copy of your credit report.

Your credit score is based on the information in your credit report. If you want to find out why your credit score is so low, then your credit report probably has the answers you seek. Plus, your personal report might have errors in it that are unnecessarily dragging down your score. Under federal law, everyone is entitled to one free credit report per year from each of the three major credit bureaus: Experian, TransUnion, and Equifax. To request a copy of your credit report, visit www.annualcreditreport.com.[1] Learn more about credit reports in the eBook Credit Workbook: The OppLoans Guide to Understanding Your Credit, Credit Report and Credit Score.

2. Pay your bills on time. No really.

Your payment history accounts for 35 percent of your FICO score. Make a spreadsheet with all your payment dates, set reminders to check your minimums, and make the payments on time. It’s that simple. And even if you miss payments by a day or so, don’t tear your hair out. Many lenders and credit card companies have a grace period before they report a late payment to the credit bureaus. Plus, if you open a new account, making on-time payments from the outset will help your FICO score long-term.[2] You can read more about why you should pay your bills on time in our blog How One Late Payment Can Affect Your Credit.

3. Use less than 30 percent of your credit limit.

Your credit utilization ratio makes up 30 percent of your FICO score, which begs the question: What is a credit utilization ratio? Basically, it’s the amount of your available credit that you are actually using. If you have a credit card with a $5,000 limit and you have used $1,000, then you have utilized 20 percent of your available credit. In general, keeping your credit utilization ratio below 30 percent will help boost your score. This means paying down your balances and then keeping them low. However, it might also mean requesting that your credit card company increase your credit limit. (Fair warning: If you don’t have a good history of paying bills on time, they aren’t going to give you more credit.)

4. Keep your old cards open.

Once you have paid off a credit card, you should just close that card, right? Nope! You should keep that card open. Remember your credit utilization ratio? That card represents a bunch of available credit that you aren’t using. And since you have a longstanding history with that credit card, it helps you more than opening a new card would. In fact, do not open up new cards just to create more available credit. According to FICO themselves, that could end up backfiring on you and lowering your score.

5. Pay down your debt.

Start with your credit card debt. Did you know that the average US household has over $15,000 in credit card debt?[3] Yikes! The key to paying down your debt is to make a plan and then stick to it. Create a monthly budget that comes in well under your monthly income and use that extra money to pay down your cards. Two popular methods of debt repayment are the Debt Snowball and the Debt Avalanche. Check them out to see which one might work best for you. Paying down your debt won’t just improve your FICO score, it will improve your financial future, too!

6. Think about consolidating.

Credit cards carry higher interest rates than most standard personal loans. This is one of the reasons that credit card debt can be such a heavy burden. Plus, your FICO score weights credit card debt more heavily than it does other types of personal debt. So if you are having trouble paying down your credit cards in a timely manner, think about consolidating those cards instead. Shop around to see if you qualify for a personal installment loan with a lower Annual Percentage Rate (APR) than your credit cards. Shifting that debt from a credit card to a personal installment loan could net you both an improved FICO score and a more reasonable path towards debt repayment. You can learn more about the ins and outs of debt consolidation loans in our blog series, Debt Consolidation 101.

Making your payments on time with a personal installment loan from OppLoans could help improve your credit score.

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References:

  1. Free Credit Reports. Federal Trade Commission: Consumer Information. Accessed from https://www.consumer.ftc.gov/articles/0155-free-credit-reports.
  2. How to repair my credit and improve my FICO Scores. MyFICO.com. Accessed from http://www.myfico.com/crediteducation/improveyourscore.aspx.
  3. El Issa, E. “2015 American Household Credit Card Debt Study.” Accessed from https://www.nerdwallet.com/blog/credit-card-data/average-credit-card-debt-household/.

Have Bad Credit and Need a Personal Loan? Let’s Play the Bad Credit Lender Dating Game!

DatingGameV1

If you’re shopping around for a bad credit loan, it can be hard to know which loan is right for you. Really, it’s a lot like online dating. For one thing, just like there are a lot of sketchy people lurking online, there are also a lot of shady lenders out there looking to get matched up with inexperienced borrowers. But even among the honest and responsible lenders, how can you know which is really right for you?

Before we get to our most eligible options, here are some bad credit personal lenders that practice predatory behavior. You really can’t swipe left fast enough when you’re dealing with:

Payday Lenders

These lenders offer short-term, fast cash loans that only average around 14 days. That quick turnaround might sound nice but, in reality, these loans are pretty nasty. They have extremely high interest rates, with an average Annual Percentage Rate (APR) of 339 percent.[1] Payday loans are also structured to be paid back in a single lump sum, which is difficult for many borrowers. A lot of payday borrowers end up rolling their loans over again, trapping themselves into a continuous cycle of debt. It’s a bad relationship they just can’t get out of!

Title Lenders

Take everything we just said about payday lenders and add losing your car: That’s title loans. These are month-to-month, short-term loans with an average interest rate of 25 percent that adds up to an APR of 300 percent. Since these loans are secured by the borrower’s car title, you can usually borrow more with a title loan than you can with a payday loan. However, it also means that the lender can repossess your vehicle if you can’t pay the loan back. In fact, one out of every five title loan customers eventually has their car repossessed.[2] Imagine if you had to give someone your car in order to break up with them. That’s a person you should avoid!

Okay, now that we’ve got the bad eggs out of the way, here’s a few types of bad credit personal lenders that you can swipe right on and see where things take you:

Personal Installment Lenders

These lenders offer long-term installment loans, which usually have a minimum term of six months and are designed to be repaid in a series of equal, regularly scheduled payments. Their loans are also amortizing, which means that every payment you make goes towards both the principal loan amount and the interest. Dating them would be a calm, loving series of Netflix binges, home-cooked meals, and weekend antiquing. OppLoans is a personal installment lender, and our interest rates are 70 to 125 percent lower than your typical payday lender. That last part isn’t true of all installment lenders by the way. If you’re taking out an installment loan, you’ll still want to do your research.

Credit Unions

These lenders work a lot like traditional banks, only they are not-for-profit, member-owned organizations. Credit unions also have different requirements for membership than banks do. Being eligible for membership could depend on where you work or live, or even where you go to church. Credit unions that belong to the National Credit Union Administration (NCUA) offer Payday Alternative Loans. These loans have principals between $200 and $1000, terms that are one to six months long,[3] and interest rates that are capped at 28 percent.[4] That could be a great deal! However, you have to be a member for one month before you qualify for one of these loans. They’re a great date, but they’re picky.

Charities and Community Organizations

If you have bad credit and need a small cash loan, you might be able to get one from a local charity in your area. Many of these organizations have small-dollar lending programs with reasonable rates that are aimed at combating predatory payday lending in small communities. Some even offer credit-counseling services, which can help you build a budget, practice better financial habits, and improve your credit score over time. They help you grow and make more responsible decisions—like any good partner should.

We all know people sometimes need a financial partner. So skip the predators and go with a reliable, honest, financial institution that has your best interest at heart!

Visit OppLoans on YouTube | Facebook | Twitter | LinkedIN

References:

  1. “Payday Loans and Deposit Advance Products.” Retrieved September 6 from http://files.consumerfinance.gov/f/201304_cfpb_payday-dap-whitepaper.pdf.
  2. Pascual, K. “1 In 5 Auto Title Loans End In Car Repossession: CFPB Study.” Retrieved September 6, 2016, from http://www.techtimes.com/articles/159308/20160518/1-in-5-auto-title-loans-end-in-car-repossession-cfpb-study.htm
  3. Payday Loan Alternatives. MyCreditUnion.Gov. Retrieved September 1, 2016, from http://www.mycreditunion.gov/what-credit-unions-can-do/Pages/payday-loan-alternatives.aspx
  4. Aho, K. “Payday Loans: How They Work, What They Cost.” Retrieved September 1, 2016, from https://www.nerdwallet.com/blog/loans/payday-loan-alternatives-dodge-debt-trap/

Finance Friday: It’s Labor Day Weekend!

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It’s a three-day weekend, college football is back, and there’s still that last hint of warm summer weather. Take some time this weekend to stare lovingly at your lawn furniture and give your barbecue grill a gentle caress. If you are one of those lucky people who actually owns and regularly uses a hammock, well it is time to get your swinging in! Labor Day is upon us. Summer’s last stand.

Enjoy this weather while it lasts folks. We know you’ve got entire seasons of shows burning a hole in your Netflix queue, but those can wait. Don’t worry, the X-Files ain’t gonna solve themselves while you’re gone. Go outside and enjoy yourself. Oh, and make sure to bring sunscreen and bug spray because, hey, summer ain’t perfect.

Here are our top 10 favorite stories from this week:

Forbes.com: 101 Ways to Save Money? Man that’s …. whoa … that’s … a lot of ways.

Huffington Post: Just like the best offense is a good defense, the best way to save money might just be changing your behaviors around purchasing …

Las Vegas Review-Journal: When it comes to payday loans, senior citizens are often the ones who suffer the most.

Mic.com: Two competing ballot measures are duking it out in South Dakota. One is aimed at curbing payday lenders, the other is aimed at “curbing” payday lenders. (The scare quotes are key.)

QCOnline.com: The rise in storage units might be a bad omen for the health of the US economy.

WSAZ.com: Need an EpiPen? Here’s some ways to get one while saving money.

11Alive.com: This article busts five popular myths surrounding credit scores. It’s like an episode of Mythbusters only nothing gets blown up … so … okay it’s not nearly as cool as Mythbusters, sorry.

Credit.com: A great piece on the effect that buying a house can have on your credit score.

CultureMap Dallas: The State Fair of Texas starts today. Here’s a list of every Fair-related discount out there.

Bloomberg BNA: Two banks may be staring down the barrel of RICO claims in regards to their involvement with payday loans.

ICYMI this week on the OppLoans Blog:

Word of the Week: Rollover

Showdown at Title Loan Corral

Top 5 Myths About Online Loans Debunked

Have a great Labor Day weekend!

If you’re looking for fast cash or shopping for an online loan, don’t get fooled by predatory lenders. Skip the payday and title loans and apply for a safer, more affordable, personal installment loan from OppLoans instead. To learn more, or to apply for a loan today, check out our homepage: OppLoans.com

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Installment Loans: More Mileage for Your Money (Part 1 of 3)

Ask a teenager if they’d rather drive a minivan or an F1 racer, and you know what the answer is going to be. Easy decision. Of course, the choice is easy for adults too. Given the option between a solid, dependable ride and a deathtrap, most adults would choose the safe and reliable vehicle.

The difference between something safe and something wildly dangerous is exactly the difference between an installment loan and a payday loan. While a payday loan promises to get you from “in debt” to “out of debt” at warp speed, that promise rarely holds true in reality. More often than not, these short-term loans lead to debt that spirals out of control. On the other hand, installment loans are safer, more reliable, and less likely to blow up in your face.

In this blog series, we are going to take a peek under the hood to see just how these loans work. First things first, let’s cover some basics:

Payday Loans: Make Sure to Wear Your Seatbelt

It’s right there in the name: these short-term cash loans are designed to tide borrowers over until their next pay day. They’re pretty easy to get, which is one reason they seem so attractive. Oftentimes, a potential borrower needs little more than a bank account and a photo ID in order to qualify for one.

Payday loans generally have a maximum limit of $500, an average repayment term of 14 days, and charge an interest rate of $15 per $100 borrowed. And while that interest rate doesn’t look too bad at first, it’s because that 15 percent rate only applies to the stated repayment period. To truly compare costs, we can’t just look at the simple interest rate. Instead, we have to look at another figure: The Annual Percentage Rate, or APR. With a 15 percent interest rate over a two-week period, the standard APR for a payday loan comes to 390%. Yikes!

If they are so expensive, then why do people use them? Well, the majority of payday loan borrowers are people who don’t have a ton of options when it comes to getting a loan. These are people who don’t have a great credit score, and their average income is only $26,167.[1] Most traditional lenders think these types of borrowers are too “risky” to lend money to. Payday lenders, on the other hand, see them as perfect targets for their high-cost products. Read more in our eBook How to Protect Yourself from Payday Loans and Predatory Lenders.

Payday loans are also designed to be paid off in one lump sum payment, which can be difficult for borrowers to afford. Installment loans, on the other hand, are designed to be paid off gradually, over time …

Installment Loans: Even the Cup Holders Are Spacious

Like payday loans, installment loans have a preset repayment term. Unlike payday loans, this repayment term is usually a minimum of six months. Mortgage and auto loans are most often set up as installment loans, as are most personal loans. While payday loans are usually capped at $500, most installment loans are available for much larger amounts.

Installment loans come with a series of regularly scheduled payments, usually once-a-month. Each payment is the same size as every other payment, and each payment consists of two parts: one part of the payment goes towards paying the principal, and the other part goes towards paying the interest. With every payment made, the amount owed on the loan grows smaller. This type of structure is referred to as “amortization.” You can learn more about whether an installment loans is right for you in Top 5 Questions to Ask Before Taking Out an Installment Loan.

Personal installment loans from traditional lending institutions, like banks and credit unions, are something that people with bad credit are probably not going to qualify for. However, there are also many lenders, like OppLoans, that offer the security of the installment loan model to borrowers with less-than-stellar credit.

There, now that we have the basics covered, check back tomorrow for Part II: The Rollover Road Trip!

References:

  1. “Payday Loans and Deposit Advance Products.” Consumer Finance.Gov. Accessed August 22, 2016. https://files.consumerfinance.gov/f/201304_cfpb_payday-dap-whitepaper.pdf.

A Payday Parable

Annual Percentage Rate Word of the Week

A Payday Parable

You’re applying for a payday loan, and you’re wondering why so many people are dead set against them. You check the interest rate and you think to yourself, “It says here that it’s only 15 percent. I guess 15 percent is a little high, but for someone with my credit score, this rate is fantastic!” So you sign up for the loan and go on your merry way …

Cut to three months later. You’ve had trouble repaying the loan and you’ve ended up rolling it over six times. You do the math and you realize that the amount you’ve paid so far in interest adds up to 90 percent of what you were loaned. 90 percent! In only three months! What happened to that 15 percent rate you got when you signed up for the loan? You dig out your loan agreement and you read it through again …

And that’s when you see it. Down there in the corner of the document. It says “Annual Percentage Rate: 390 percent” That’s a heckuva lot higher than 15 percent!

The True Cost of Borrowing

Whenever shopping for a loan, always make sure you check the Annual Percentage Rate, or APR. It is a standard unit of measurement in lending that will let you compare the relative cost of different loans, no matter how they’re structured. The APR measures how much a loan would cost if the principal loan amount were outstanding for a single year. It’s expressed as a percentage of the amount loaned, so a $1,000 loan that charged $100 in interest per year would have an APR of 10 percent.

What’s the Difference?

Now, you might be saying, “isn’t that basically the same thing as the interest rate?” Not quite. A loan’s interest rate is a very important part of its APR, but it’s not the whole thing. The APR measures the full cost of a loan, which means that it includes additional fees and interest above and beyond the simple interest rate. This is why financial advisors will always tell you to check the APR when applying for a loan or credit card. It’s how you know the loan’s true cost.

APRs in Payday Lending

With a payday loan, the stated interest rate only applies for the length of the loan term. So if you take a 14-day payday loan with a 15 percent interest rate, that rate only applies for 14 days. If you were to rollover the loan and secure an additional 14-day term, you would be charged an additional 15 percent. All of a sudden, the cost of your loan is 30 percent. Over the course of a full, 52-week year, a 15 percent rate every two weeks would add up to 390 percent. That’s the PAYDAY loan’s APR. And that’s ridiculously expensive.

Read more about the Annual Percentage Rate (APR).

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