Payday Loan Companies Hope to Branch Into 12-Month Loans
With lawmakers looking at the pros and cons of payday loans, payday lenders based in Indiana are asking to branch out. While a typical payday loan is taken out and repaid in a matter of weeks, these cash advance companies want to offer lower interest 12-month loans.
Like them or hate them, payday loans help people with poor credit or no credit history. If a car repair, home repair, or medical bill is urgent and the person lacks the cash, getting a personal loan from a bank can be challenging. Even if the bank considers your application, it can take weeks for underwriting to process and approve or deny. Sometimes, waiting that long is not feasible. This is where payday loans help. You borrow the money and agree to pay a loan fee within the set time frame that’s often two weeks, or the equivalent of a pay period with your work. As a result, most payday loans are for smaller amounts of money, usually no more than $1,000, and in some states, laws require the loans to be less than $500.
For families to get more money for something like a furnace replacement or urgent septic repairs, payday lenders want permission to offer larger loans that are paid back over the span of a year. These loans will have a loan fee plus an interest rate that would be less than 20 percent.
It’s an idea introduced in Indiana House Bill 1340 that’s currently being studied by a committee. If it passes the committee and becomes a reality, borrowers will have an alternative to payday loans that are still easy to obtain and reduce the APR paid on a traditional short-term payday loan. It’s an idea that keeps companies in business and ensures borrowers have access to loans even when banks and credit unions say no.