For years, payday lenders have preyed upon hard-working people struggling to make ends meet, with “easy” loans that can cost thousands to pay off. Enough people caught on to their scams, and payday loan companies were forced to evolve to stay relevant.
David Fisher, the CEO of Enova, told Bloomberg in an interview, “We made a big effort over the last five years to diversify our business.”
Enova, as well as competitors like Curo, have turned to other financing products, like installment loans and lines of credit. Today, a vast majority of their revenue comes from these products rather than payday loans. These new products may differ in name from payday loans, but they come with the same exorbitant interest rates — and they aren’t subject to the same regulation. In fact, Fisher cited regulatory exposure dispersion as a primary factor in his company’s product diversification.
The Difference Between Payday and Installment Loans
A payday loan sounds quite simple in theory: a small amount of money lent at a high interest rate, to be repaid when the borrower gets their next paycheck. So if you need to borrow $100 until your next payday, you’ll write a postdated check — to be automatically cashed on payday unless you extend the loan — for $100 plus the fee. The fee might be a percentage of what you borrow, or a set amount for every dollar borrowed. Extending the loan, which many people who find themselves in this predicament are forced to do, allows you to keep the loan for another period, but costs another fee in addition to the original one.
With an installment loan, you borrow a set amount of money upfront and repay according to a schedule. As more and more payday lenders offer them, they’ve become increasingly popular with people who have low credit. Unfortunately, they can become as burdensome as a payday loan.
Be Wary of These New Products
Fair lending advocates have criticized the newer installment loans, likening them to their debt-trapping predecessors.
“It’s the same predatory lending schemes in a different package,” Diane Standaert, director of state policy at the Center for Responsible Lending, told Bloomberg. “What has remained unchanged for all those years is that the debt trap remains the core of the business model.”
APRs on Enova’s subprime loans — including both installment and payday products — can range from 100-450%. Curo loans have comparable interest rates.
Please be cautious of these kinds of products. Throughout the 30-plus years that I’ve practiced law as a bankruptcy attorney, I have yet to find a quick, easy fix for debt. If something sounds too good to be true, it probably is.
Getting Help in Hard Times: Talk to Chapter 7 Lawyers in Memphis TN
If you’re considering a payday or installment loan, there’s a good chance you are struggling with debt. Unfortunately, these short-term fixes are problems, not solutions.
Unlike the inescapable cycle of high-interest loans, bankruptcy can actually bring lasting financial freedom. If you’re looking to solve your financial problems sustainably, I’d love to discuss your options with you. Contact us here or call (901) 327-2100 to talk to our Chapter 7 lawyers in Memphis TN today.