A new spin-off from payday loans has filtered into Hispanic communities in Southern California and Texas. This new tweaked version of direct payday loans stems from a Stanford student, James Gutierrez. His business school project focused on single-digit interest rates for high risk loans to be paid off over 9 or10 months instead of just a few short few weeks.
The new payday loan model is set up at a small kiosk within small Hispanic supermarkets. Agents offer unsecured loans to those who need some fast cash when there is little to no credit built in to obtain other types of financial help. The loans are still much more expensive than bank loans, but they are helping people in small Hispanic communities get access to much needed cash. Often times, people will take out a small loan in order to get groceries or pay for vehicle repair. The money is most often used within the same community strengthening the community's economy.
These new payday loan lenders already deny about 50% of its applicants and in turn have a very low default rate. Lending to someone who does not have the means to make the payments is following best practices rules. There are many online loan lenders who good business policies of keeping rates lower than the state caps. Lenders who look at direct payday loans as opportunities for people, who have nowhere else to go to make ends meet, will offer better rates. There are many companies who look at loans only as potential profit, and their rates will follow state caps. There are those predatory lenders who do not follow any type of rule or regulation but will prey on those who need extra money fast by offering larger amounts. Extremely high interest rates coupled with unaffordable loan amounts create big trouble for those who accept the loans.
Borrowing money from an aggressive or predatory lender will also put you more at risk with dealing with possible fraudulent companies. Steer clear of a lender who will offer you loans when the majority will not.
Payday loans online, brick and mortar, or now at conveniently located kiosks in limited locations, are still a high risk loan to those with poor or thin credit. People with good credit do often use these low cost loans to help out a financial crunch. These borrowers tend not to go into default. The debt struggle tends to fall on the laps of people who have no secure payoff plan or are loaned money without proper income to back up the payoff.
The battle will continue between opponents and promoters of the low cost payday loans. Opposition will keep governments trying to restrict the payday loans process and in some areas ban them altogether. Those for the fast cash opportunity will fight for the rights of people to keep options available to use at their own discretion. The argument that people who use these types of loans may fall into the low income bracket, but it does not mean their intelligence is low. Financial solutions are options and it is up to the borrower to find the one which fits their finances the best.