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Installment Loan better than Overdraft Fees?
#1
In this articleThaddeus King, an officer of The Pew Charitable Trusts’ consumer finance project, says that installment loans are a better choice than overdraft fees.  I think the problem is that banks are not allowed to offer small-dollar installment loans. But what about non-bank installment loans? Would that not be just as good (if used properly)?
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#2
(12-28-2017, 07:39 AM)Michael Puttman Wrote: In this articleThaddeus King, an officer of The Pew Charitable Trusts’ consumer finance project, says that installment loans are a better choice than overdraft fees.  I think the problem is that banks are not allowed to offer small-dollar installment loans. But what about non-bank installment loans? Would that not be just as good (if used properly)?

The truth is that most times the interests that comes with bank loans is a major deterrence for many people who desire to take loans from banks. I can remember one time ago when a very good friend of mine wanted to get a loan from a bank here, the conditions given to him were horrible which he was willing to take on but on getting to the interest placed on the loan, he had no option but to give up. 

Paying on installments for loans is very appropriate, it's definitely going allow the person who took the loan to manage himself and the business while paying for the loan together with the interest in installment which he won't feel much until the whole payment is made completely.

There are some no banking sectors that offer small loans here in Nigeria, most of them are cooperative society. They place interest in the loans as well but the bright side is that their conditions is not too rigid like banks.
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#3
I personally availed this type of loan, it was hard since it requires a lot of requirements but when you got approved and built a good record with the bank then every transaction will be easy for you next time and of course it is way better than overdraft fees since some banks won't approved overdraft transaction if it was too high.
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#4
The use of a debit card is supposed to limit your spending to your bank balance but if the bank allows overdraft for a stiff fee, then it defeats its purpose. In this instance, it looks as if there's a deficiency in terms of consumers' education that led many to opt in to something that they may not actually need.

A credit card may have also served the cardholder better if he/she wanted extended payment terms as it can be paid much later and at zero interest rate if the balance is paid in full. Some credit card companies even offer zero percent interest if you convert a single purchase into a short-term installment transaction. This is often done as a promotion to entice cardholders to use their card for purchases.

At $35 for each instance of overdraft, assuming it was done intentionally, it might have been better to secure installment loans with more relaxed payment terms where the borrower can pay a fixed monthly amount until the loan is fully settled. This will be lighter on the budget than being required to pay the overdraft on short notice.
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#5
Overdraft fees are killer. I check my bank account balance every night before I go to bed to make sure I have enough money in my account
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#6
Installment loans is a better and appropriate offer for consumers advantage. Banks and non banks institutions made so many loan offers that really catches the eye of the consumer. There are some banks today that offers small loans with appropriate interest rate. But if you missed the payment additional charges applied on top. For Non banks like associations and cooperatives, offers are exclusive for members only and still percentage rates are given on top of the installment loans. Most of the members/consumers of this institution preferred to acquire loans within their organization to acquire dividends/shares as being part of the organization. As what so many Merchants did today, they also offered the zero interest rate per purchase or stretch payment scheme for consumers to be able to pay the amount in full into their extent. Unlike overdrafts fee, i don't see any benefits for us but the charges being incurred once we made unintentional or uncontrolled buying from accounts. So, to avoid this things to happen make sure you have to check and monitor your account regularly or if there are transactions..
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#7
This article enlighten me.
Looking for a quick loan? It might have a big overdraft fee attached.
Online payday loans can look enticing, but they can come with hefty fees attached, according to a report from the Consumer Financial Protection Bureau.
By Sean Pyles, NerdWallet / April 27, 2016

[Image: 973282_1_0330-money-changer_standard.jpg...rd_300x200]
US hundred-dollar bills are seen at AYA Bank's money changer in Yangon, Yangon Region, Myanmar (Burma) (July 17, 2015).
Soe Zeya Tun/Reuters/File


Half of all online payday loan borrowers are hit with bank penalties averaging $185 when the automated payments on their loans fail or cause an overdraft, according to a report from the Consumer Financial Protection Bureau.
More than one-third of borrowers with failed payments eventually lose their bank accounts, the CFPB says.


Online payday or installment loansare short-term, high-interest loans granted to borrowers without a traditional credit check. Some must be repaid in a lump sum after a week or two, and others may be repaid in installments over several months or years.
[Image: RTR2UFVH.jpg?alias=standard_100x67]
Can you manage your money? A personal finance quiz.

The CFPB examined nearly 20,000 bank accounts making payments to 332 of these lenders over an 18-month period from 2011 to 2012. The lenders typically use an electronic funds transfer system to deposit the loan directly into the consumer’s checking account, then use the same mechanism to withdraw the money owed come payday.
“Payday lenders promise instant cash, but since they don’t check your credit, these loans can have interest rates as high as 1,000%,” says Amrita Jayakumar, a NerdWallet writer who specializes in personal loans. “When you’re hit with bank fees on top of high interest, it’s even easier to get trapped in a cycle of debt.”
‘Collateral damage’ from repeated payment attempts
When lenders attempt to debit payments from accounts with insufficient funds, the borrowers face overdraft or insufficient funds fees.
Lenders often make multiple attempts to debit the account in the same day, the CFPB found, and sometimes try to retrieve a payment in multiple chunks to increase the likelihood that the borrower can repay at least part of the loan. Each failed attempt can result in high fees in quick succession for the borrower; the typical bank penalty for each overdraft or insufficient funds notice is about $35.
The likelihood of successful payment falls with each succeeding request, the CFPB said. The first attempt typically nets lenders $152, the second $53, and the fifth just $21, data showed.
In addition, lenders themselves may charge penalties for failed payments, which can range from a flat fee of $25 to a percentage of the outstanding balance, levied daily.


Of the borrowers who were hit with a bank penalty, 36% ended up involuntarily losing their bank accounts, usually within 90 days of the first failed transaction. Involuntarily losing a checking account at a bank or credit union can leave customers blacklisted from getting another such account in the near future.
“Taking out an online payday loan can result in collateral damage to a consumer’s bank account,” CFPB Director Richard Cordray said in a statement. “Bank penalty fees and account closures are a significant and hidden cost to these products.”
The fees are bad; the loan is worse
The CFPB, which has authority over the payday loan and payday installment loan markets, is considering a proposal that would block payday lenders from making more than two unsuccessful attempts in a row on a borrower’s checking or savings account. A ruling is expected this spring.
Borrowers with bad credit already face steep odds, Jayakumar says, even without the added burden of bank penalties. In order to get a loan with terms generally considered consumer-friendly — that is, interest rates of 36% or less — borrowers face a traditional check of credit report and credit score. The borrower’s debt-to-income ratio is also a key factor in approval.
She suggests borrowers investigate more traditional sources of small-dollar loans, such as credit unions and online lenders that check credit. Some accept credit scores below 600.
The difference between the two types of loans is stark: A $2,000, two-year loan even at 36% APR would have monthly payments of $119, Jayakumar notes. At 200% APR, a conservative rate for an online payday installment loan, the payments would be $341.
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#8
(12-28-2017, 07:39 AM)Michael Puttman Wrote: In this articleThaddeus King, an officer of The Pew Charitable Trusts’ consumer finance project, says that installment loans are a better choice than overdraft fees.  I think the problem is that banks are not allowed to offer small-dollar installment loans. But what about non-bank installment loans? Would that not be just as good (if used properly)?

There is the existence of microfinance banks that are into savings as well as giving loans to customers that are really looking forward to paying these loans on a monthly basis. These banks has been created to handle the issue of giving small dollar loans and their main target is to give soft loans to small business owners that would be paid over a period of 6 months to a year and the interest is not that huge compared to what we have with payday loans. 
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#9
I think if you can compare rates and use a service like Quicken or some other site that allows you to compare the rates on the loans you may be able to do well in terms of the loans. Always compare rates and fees on loans and go for the one that has the fewest requirements and offers maximum flexibility in terms of re payment.
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#10
(01-01-2018, 10:40 PM)Michael Puttman Wrote: Overdraft fees are killer. I check my bank account balance every night before I go to bed to make sure I have enough money in my account

True! That is why I am more happier that my bank is strict on its rule about overdraft transactions because if its not then being an impulsive buyer that I am, my money will surely be in negative by now.
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