When it comes to who can borrow money -- and how -- let's just say lessons have been learned.
One of the things that's come from that thinking is the workplace loan, where employees can take out loans or cash advances through an employer.
Let's say someone has a car that breaks down. Gotta get it fixed, right? But what if this person doesn't have the money?
"Unfortunately, many of our consumers don't have access to traditional bank credit," says Ken Rees, CEO of Think Finance, a workplace lender out of Fort Worth. A lot of his "consumers" are restaurants workers, hotel staff, even teachers and nurses. And he says a lot of times, they can't get emergency credit.
"It's the choice between this product and a payday loan or this product and no access to credit at all," he says.
That product he's talking about is called Elastic. It lets employees borrow money through their employer. At Think Finance, a worker can get a line of credit, up to $1,000. There's a 5 percent fee for cash advances. Plus, other fees for higher loans--the bigger the loan, the higher the fees.
"They can get onto the website. We're able to ping that payroll system, know that they've been paid a certain amount, know that they are who they say who they say they are, and then we're able to feel confident giving that customer the credit that they need," Rees says.
How much credit depends on things like how long a person has been with a company, and credit history. Employees can repay the loans by check or in cash, but usually these loans are repaid directly from a paycheck.
Companies like FairLoan, a San Francisco-based lending startup, offer incentives for repaying a loan straight out of a paycheck.
"When you're applying for the loan, it's made very clear that if you want to pay from your paycheck, you have access to more credit," says Alix Karlan, FairLoan's founder and CEO. "We limit loans that are not repaid through the paycheck to $500."
Karlan says repaying the loans out of paycheck is safer for both the lender and the borrower. He says they're meant to be affordable, with interest rates starting at 18 percent.
"And the most expensive loan that we offer comes with a 30 percent interest rate and a 5 percent origination fee," he says.
Karlan and other workplace lenders say that's way better than a payday loan, which can carry at least 300 percent annual interest. Plus, Karlan says, his company reports info to the major credit bureaus, so it helps borrowers build credit.
But critics say these kinds of loans can be just another kind of payday loan.
"So if somebody needs to pay groceries, or pay their utility bills, and they're trying to stretch out payments or make money go a little further, they can't rearrange that debt because that's the first in line," says Gary Kalman, director of federal policy for the Center for Responsible Lending.
Even worse, Kalman says, they'll take out other loans to pay off the first one. A lot of companies have an answer for that, too. They offer financial coaching and sometimes rewards -- like discounts on interest rates and even free iPads -- for good financial behavior.
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