Traditional Banks Offering Alternative Payday Loans

The Consumer Overdraft Protection Fair Practices Act and the Credit Card Accountability, Responsibility and Disclosure Act may have encouraged banks to offer alternative loans, such as payday loans, causing competition among payday loans direct lenders and national banks observes Solomon Finance.

Because these enactments have muffled bank’s major sources of revenue, marked with Bank of America’s recent declaration that the overdraft fee legislation will be put into effect this coming summer, banks are reducing risks and pursuing other sources of income.  These changes include raising interest rates on credit cards, offering less free checking accounts, limiting student loans, requiring more spending to engage in credit card perks and competing against payday lenders by increasingly marketing payday loan type products under different names such as Direct Deposit Advance, branded by Wells Fargo.

As lending options continue to narrow in availability, national banks are not the only institutions competing for payday loan customers: credit unions such as Kinecta Federal Credit Union are also offering these types of services.

Short term cash loans are not the only thing that payday lenders and national banks have in common:  Both have been the largest contributing efforts to challenge federal financial regulations.  However, national banks may have an unfair advantage, argues Steven Schlein, spokesperson for the CFSA, as he mentions that national banks are exempt from state laws limiting interest rates. He adds, “banks caused the financial meltdown, and they’re spending millions and millions to spare themselves from tighter regulation while throwing the consumer lending industry under the bus,” he said. “They’re trying to divert attention to us.”

Although extra attention has been given to payday loan lenders during these financial reforms, it is unlikely that they will be significantly impacted in comparison to 2006, when Congress passed a bill that capped interest rates to 36% for active military members.  An interest rate cap at 36% on small loans ranging from a payday loan amount of $500, on a typical two week pay period term would yield insufficient profits to sustain business operations.

The industry is constantly changing: by subscribing to finance newsletters or reading industry payday loans blogs, one can stay informed and educated about traditional and untraditional lending options.

At Pay1Day.com, we are a direct payday lender committed to providing fast, simple, and convenient payday loans for our customers who need immediate cash assistance.

When does Pay1Day deposit funds?

Our loans are typically funded within one business day.

How does Pay1Day deposit funds?

Through an ACH transaction, the money can be wired into your bank account, typically in one day. What happens is that if you apply for a loan on Monday thru Thursday and are approved on the same day (typical if all information is received and verified within the same day), then we will send the money to your bank account at midnight.   However, it is then up to your bank to deposit the funds into your bank account – this usually happens on the same day as when Pay1Day initiates the wire transfer. Therefore, through an ACH transaction, your funds will typically be available within one working day.

In most cases, you can expect to receive your payday loan funds within one business day at Pay1day.com and the exact time that you receive your funds depends on your bank’s depositing activity.

Ready to get quick cash now? Why wait  >>>  Apply Now! <<<

According to a survey performed by Pay1Day.com in February 2010, 95% of the people surveyed declared that their greatest financial problem is that they had credit history issues and difficulty obtaining a loan.  The credit crunch has made borrowing from traditional banking methods increasingly difficult, leaving room for alternative loans such as payday loans to grow from 500 stores in 1990 to over 22,000 today. 

Loans are hard to come by, even with good credit.  Payday loan companies fill that gap by providing cash to those with good, ok, and not-so-perfect credit and creating an environment geared towards mainstream borrowers.  For example, many payday loan stores are cleaning up, installing attractive shelving, casings, and lighting.   In addition, they are extending operating hours to service customers who are looking to cash checks after their regular working hours.

Online payday lenders are following suit by offering customers the ability to apply for a loan online, receiving fast approvals, and money wired into their bank accounts, all done from the comfort of the borrower’s home computer.  Although they mainly operate online, some online payday lenders provide full customer support via telephone or email.

Payday loans are easier to qualify for than traditional loans, however, most lenders still require that the applicant have employment and advise not to obtain too many payday loans at once, capping it out at  2 or 3 outstanding loans at a time.

Sometimes the next pay date is just too far away and that’s completely understandable. How do you get some quick cash on short notice without having to run into hurdles with convenience, ease, and time efficiency? How about a payday loan from a direct payday loans lender? Let’s start by finding out what a payday loan is.

What is a Payday Loan?

Payday loans are commonly known as cash advances, payday check advance, payday cash advance, check advance, and other similar terms.
A payday loan is a small loan, both in the amount and repayment time period.  They typically range from $100 – $1000 and are meant to be taken out between pay periods, due upon the borrower’s next pay date.  For example, if you are employed and are paid biweekly, you can take out a payday loan and repay it on your next due date about two weeks later – however, the exact terms and conditions are dependent on the lender and the agreement between you and the lender.

What is the best way to get a payday loan?

Find a direct payday lender: There are tons of places where you can get a payday loan but the best place to get it is from a direct payday lender. In other words, with a direct payday lender, you get it from the source and not from a broker or a middle man, making it cheaper and faster.  Because you are going directly to the source, there aren’t middlemen markups and less time delays. Submit your application to a direct lender and they make the decision to approve your loan rather than having to wait for the broker to submit your application for you.Other Pros: With a direct lender payday loans, you also get benefits such as customer service support. If you have questions, you can talk with a live person in addition to being able to have fax and email support. It’s tough to find that kind of support with a payday loans broker. Get a loan from a direct payday lender now!

Get your payday loan online or from a store? You can get a payday cash advance from a brick and mortar store or get it online.  If you don’t want to drive around or wait in line, then getting a payday loan online is the better option because you can apply for a payday loan on the internet from practically any computer with an internet connection.   Applying online usually takes less than 5 minutes and with the right direct payday lender, you can get an instant approval right there on the internet.

With an online payday loan, you can expect to get money wired into your account most likely within one business day without the inconveniences of driving, messing with paperwork, or waiting in line.   Get an online payday loan now!

Receive the money and schedule to pay it back: Now that you have the money and can pay your bills, fix your car, get some groceries, or bought whatever you needed to buy, note the date that you have to pay it back so that you don’t incur any late fees or penalties.  It’s always best if you are able to pay your entire balance on your first due date because then you only pay for one set of loan fees.  Otherwise, if you rollover, given that the lender allows you to do so, then you will incur another set of interest fees, in addition to the first set of interest.  Once you find the right lender and understand the terms, you can feel at ease to  Get a payday loan now!

February 26, 2010 Los Angeles, CA.  Pay1Day.com. As new consumer protection acts decrease traditional lending opportunities, alternative loans, namely payday loans, have been on the rise, along with debate from both the consumer and lender standpoint regarding policy and practice.

Comparing to traditional loans,  payday advance loans costs can be attributed to the ease and speed of acquisition with minimal requirements of income, credit history, and housing, along with the resources needed to dispatch loans more easily and faster, usually under one business day.  Because of these inherent risks, payday loans are offered at a higher cost. Nonetheless, growing controversy continues as the rate of borrowers taking out payday loans increases, questioning the loan’s interest rate, fees, and policy as well as their necessity.

The usual payday loan fees are $15 – $35 per $100 borrowed within a 2 week period (the period in between pay dates) and are meant to be taken out only in real need when other alternatives are unavailable, such as borrowing from friends or using credit cards.  In addition, payday cash advances are intended to be held just in between pay periods and not throughout the year, hence its name, “payday” loans.

Payday loans are not new inventions. Big banks have increasingly extended similar types of products under names like checking advance services, with Wells Fargo offering such a product since 1994. The major difference is that payday loans, offered by independent financial institutions, are not backed by the federal reserve, offering a greater risk to the payday lender, seeking counterbalance by passing costs to the borrower.  In addition, with the above-average payment default rate in the payday industry, it becomes more clear why higher risk loans, such as payday loans, come at a raised price.

If a loan is paid in full upon the first due date, then the interest rate of this loan falls approximately between 15% – 35%. The problem occurs when the borrower is late on payments or makes a minimum payment that results in rolling over a balance to a next term because additional fees will be applied to the account which can become very costly, especially if this is made into a regular habit.

The choice to apply for and obtain a payday loan is up to the customer.  However, the duty to notify the customer of the loan’s terms and fees befalls on the lender. If the customer agrees to the lender’s upfront notice regarding rates, terms, and fees, then that results in a contract with no foul play, not different from the decision of paying the premium price tag for designer clothes or luxury automobile.   In that case, it would not be similar to a hidden overdraft protection fee or arbitrary credit card interest rate hikes.

The problem occurs when there are concealed terms and fees such as the ones resulting in the Overdraft Fee Legislation and Credit Act of 2009 that protected consumers from too-small-of-a-fine-print terms and unfair interest rate hikes. If a customer is made fully aware of their terms and fees obligations, a providing lender, whether it be a bank or a payday lender, should not be held liable for the customer’s inability to fulfill them.

February 25, 2010. The implementation of the Card Act of 2009 and the Overdraft Fee Legislation marks an increasingly shifted focus from traditional loan products to payday loan type services by big banks , observes a Bloomberg article and Solomon Finance.  Although the new reforms have made it difficult to sustain profitability from credit card and overdraft fees, two of banks’ most profitable products, questions arise whether the recent push for short term small cash loans, more commonly called checking advance products, will be successful for national banks while competing with direct payday loan lenders.

Recession Piggy Bank

Checking advance products are cash loans usually ranging from $100 – $500 with annual interest rates at about 120% if paid within 30 days.  These products are not new to big banks: Wells Fargo have had these loans as part of their offerings since 1994 and in 2008 by Fifth Third Bank.  These offerings are similar to payday loans with comparable interest rates and repayment time frames, usually occurring on the borrower’s next pay period with the added convenience of automatic payment withdrawals due to the issuance of the borrower’s account by the corresponding bank.

By getting into the payday loan business, big banks face two major issues: competition from established payday lenders with years and even decades of experience, and the real-life ability to profit from $500 loans with existing big-bank overhead.

Established payday lenders, whether it be online payday lenders or brick-and-mortar paycheck cashing stores, have gotten quick cash loans down to a customer service-oriented science where loans can be approved within seconds and cash can be delivered to the customer within hours; with an online payday loan lender, the entire process  can be done from the customer’s computer at practically any place in the world with an internet connection; in addition, the flexibility and added convenience such as faster customer support via multiple methods such as email, phone, fax, and the ability to customize loan features that stem from the smaller scale nature of payday loan lenders, presents a niche-barrier that may be difficult for national banks to overcome.

Replicating the payday loans business model while searching to fulfill the gap caused by the Overdraft Fee Legislation and Card Act of 2009, will prove to be an obstacle for traditional banks, interesting to follow throughout the rest of 2010.

According to Solomon Finance, payday loans lending may increase from the result of the new Credit Card Reforms, known as the CARD act, implemented on February 22, 2010. The new act enforces some stringent rules on credit card companies to protect consumers from ambiguous credit terms, fluctuating interest rates, and uninformed decision making. With these changes in effect, banks will focus on lending to those with near-perfect credit, possibly causing consumers with not-so-perfect credit to seek alternative types of loans such as payday loans…… for more on this story, Click here.

The new Credit Card Reforms, known as the CARD act, implemented on February 22, 2010, enforces some stringent rules on credit card companies to protect consumers from ambiguous credit terms, fluctuating interest rates, and uninformed decision making. With these changes in effect, banks will focus on lending to those with near-perfect credit, possibly causing consumers with not-so-perfect credit to seek alternative types of loans such as payday loans.

If regular consumers are finding it difficult to make ends meet in between paychecks without the ability to apply for traditional loans, they may have to turn to payday lenders who offer an easier and faster way to obtain quick cash.   This is evident in the increase in earnings by Texas-based cash loan company which had doubled their fourth quarter earnings to $33 million and another advance company who had tripled their earnings to almost $20 million.

The new credit card reforms, effective in early 2010, prohibits credit card companies from sporadically increasing high interest rates to consumers, however, it does not fully prevent other types of fees such as zero balance and inactive card fees.  Because of this, credit card companies will increasingly tighten up lending to customers, especially those with poor credit history,  to reduce lending risks, especially when charging higher interest rates to paying consumers are not an option for recouping losses.    This is why payday loans seem like an attractive alternative.

Payday loans are short term, small cash loans, usually between $100 – $1000, granted to consumers with the loan due date being the next pay date, although some payday lenders allow for due date extension.   The advantage of payday loans, relative to traditional loans, are that they are much easier to qualify for and faster to obtain with some payday lenders offering an online service where one can apply for and be approved for a payday loan online.

Traditional bank loans and credit card criteria usually require a higher credit score and clean credit history in addition to a longer employment history (usually a minimum of two years), and housing history (also a minimum of two years).  With payday cash loans, the usual requirement is employment with income enough to substantiate repayment.

Because of the ease of obtaining payday loans, they are considered high-risk loans which are reflected in larger interest rates ranging from 15% – 30% with APR ranging from 300% – 800%.  Hence, those who get payday loans are advised to pay them off during the first due date as to not incur late payment penalties or loan extension fees.

With payday loans, just as with credit card debt and other types of loans, if consumers are well-informed of the pros and cons of terms, they will be better able to make the right decisions.

With the new implementation of the credit card regulations, known as the CARD act, consumers may have to seek alternative lending such as payday loans.  When we put restrictions on banks, they can’t charge as much, the inability to profit off of high interest rates makes them take less riskier loans which means that customers who don’t have perfect credit may have to turn to alternative types of loans such as payday loans… read more about it here.

The credit crunch has made it very tough to borrow from traditional banks. So what alternatives are there? Below are two alternatives, one for businesses and the other for individuals.

Purchase Order Financing

A common problem for businesses is that while they are using their resources to fulfill purchase orders, customers are not paying their invoices, putting a strain on the business’ cash flow. A purchase order financing can help. A purchase order finance is a short term loan to the business that entails funding the business with an initial amount to help them finish their order in exchange for payment when the business has received payment and shipped the order.
The benefits of a purchase order finance is that businesses can get cash flow fairly quickly, however, the annual percentage can be past the 40s.

Payday Loans

An alternative for a smaller short term cash flow is a payday loan. Payday loans are granted to borrowers and due during the borrower’s next pay date, usually falling between 7 and 30 days away. Payday lenders usually look for borrowers who have a steady job and an active checking account.