Myths About Subprime Lenders
- Subprime lenders are anti-saving. Most payday loan, installment loan, and car title loan lenders offer creative savings and reward plans
as part of their loan product line.
- Our rates are usurious. Bank NSF fees approach $38.00. When computed as an APR, these fees equate to 1800%. ATM fees approach 300% APRs. Banks are charging check-cashing fees to the unbanked for checks drawn on their own
bank! These checks have zero risk! Additionally, there are minimum balance fees, ATM fees, and more.
- Banks are competing with us. A few, including Wells Fargo, offer consumer loan products. To qualify, a bank customer must have direct deposit of their payroll proceeds. The bank takes their fees when their customer's payroll check "hits" the bank account. Direct deposit means ZERO risk to the bank. The APRs on these products exceed
280%!
A typical sub-prime loan scenario
Our customer needs $500 to repair the transportation they use to get to work. They lack the cash. They don't have a credit card. If they do, they don't have $500 available on it. They prefer not to burden friends and family by asking for a loan. [Often, these folks are in the same situation as our customers.]
So, our customer borrows $500 for 14 days. We charge $15/$100. Our customer pays us $575 on their next payday. Their APR = 392%. This certainly beats bouncing a check, paying a utility reconnection fee, using Uber to get around for 14 days, the humiliation of asking friends for a loan…
Myths about Our Customers:
- Low-income consumers and little education typify our customers.
- They do not understand fees.
- They did not perform a cost-benefit analysis before using our services.
- Their decision is impulsive when considering the use of our services.
- They're trapped. Our customer has no other choice for temporary financial help.
The following statistics are based on telephone interviews from a database of 1,544,489 consumer loan customers in 40 States garnered from both good accounts and accounts not in good standing.
Latest demographics for single-payment loan product customers
- 66% = $25,000 annual household income & above.
- 52% = $25,000 -$50,000 household
income.
- 58% have some college.
- 1 in 5 = college degree.
- 41% = own homes compared to the US population of 60%.
- 46% married vs. 59% US-wide.
- 50% have children.
- Our customer is generally younger.
- Only 15% are over 55
- 61% White.
- 24% Afro-American.
Our customers do have other options, contrary to popular belief! They choose us for convenience and ease of use. They have, on average, a choice among five financial products in addition to our payday loan/installment loan
product:
- Checking Acct
- Overdraft
- Home equity line
- Credit cards
- Other
When interviewed, consumers say our loan products and services cost less, we are faster, our fees are easily
understood, and we're more convenient.
Our consumer loan product was the second-most highly rated of the seven industries evaluated. Credit Card companies were rated the lowest; Grocery stores the highest. "Treated fairly" and "good community citizen" were typical customer comments.
Of the six customer experiences rated, the
subprime consumer loan product was rated third in overall customer satisfaction. Banks = lowest. The consumer loan product was rated second among the seven financial products. Following were credit cards and equity loans.
- 82% of customers are happy with reminder calls.
- 90% understand fees
- 94% understand the payback period.
- We are convenient!
- Less paperwork, fast approval, great locations/online, only 4% have no other choice in financial products!
Our funds are used for
- Unexpected expenses
- Avoiding bounced check fees
- Avoiding late charges on bills
Bottom Line:
Our subprime loan customers appreciate that our fees are 100% disclosed on our websites and stores. They recognize that transparency, privacy, speed, and convenience are paramount to our business model. Our customers also recognize that we are appropriate for temporary, short-term financial help. We are their go-to solution when they face a sudden financial challenge requiring fast access to cash.
Ready to jump
into "the business of lending to the masses?"
