First, ZestCash is charging a substantially lower APR than payday loan shops (280% versus 480%).
You're cherry picking one of their lowest rates and putting it against the assumption that someone's going to roll a payday loan 7 times. If you actually click through and read the CRL report they're quoting, you'll notice that they're misusing the statistics. ZestCash claims that the CRL reports that 80% of payday loans are rollovers, but when you click on that link, the CRL page you're taken to doesn't give that statistic anywhere. I've only skimmed the full report, but I haven't been able to find where they're getting that number from. I'm left highly dubious of the claim that the average payday loan is rolled over 7 times, though, given that the report does explicitly state that the average number of transactions per borrower who takes out more than one payday loan per year is only 9 (and 20% of people who take out payday loans only take out 1 per year, and aren't counted in that group).
Second, ZestCash allows partial repayment. This is critical, as requiring full repayment is a major factor in forcing payday loan customers to rollover their loans, incurring additional fees and leading to additional loans. Partial repayment is far more likely to result in a customer who can actually pay off their loan and is not trapped in a cycle of debt.
But they also require a minimum of a two month term, and I can't find any indication on the site that they let you pay off the loan early to avoid additional interest accrual.
Third, ZestCash further increases the chances of repayment by allowing flexibility in both amount and length of the loan.
That's what they claim. Hard to state it as fact just yet. And if the chances of repayment are increasing, shouldn't the APR be going down? The justification for such high rates is supposedly that these are such high-risk loans.
Anyone approved at ZestCash gets a personal representative who will work with the customer 1-on-1 for the life of the loan
A part of what makes me so mad about this site is that they're posturing themselves as a caring, responsible alternative that's going to hold your hand through this process. If you care and are responsible, you're not going to charge such usurious rates. Period.
So you'd prefer that economically viable rates are only offered by people who are irresponsible and/or uncaring.
No. I'm saying that only irresponsible and/or uncaring people offer those rates, that the act of charging those rates demonstrates you to be irresponsible or uncaring.
> But they also require a minimum of a two month term, and I can't find any indication on the site that they let you pay off the loan early to avoid additional interest accrual.
This is the most damning part, IMO. I can understand the necessity of high fees to cover risk, but when someone has the ability to pay a loan back and you refuse to take their money so that you can get more interest, that's pretty shady.
The only other time I've heard of conditions like that are for some car loans, where they give you a better price on the car and then try to make the money back with a higher-interest loan. Then they want to prevent early payback to ensure their profit margins.
As mattmcknight points out elsewhere, I did miss a sentence that indicates they will accept early repayment. The 30% origination fee on every loan is still significantly higher than most payday loan places, though (it's usually something more like 15%).
First, ZestCash is charging a substantially lower APR than payday loan shops (280% versus 480%).
You're cherry picking one of their lowest rates and putting it against the assumption that someone's going to roll a payday loan 7 times. If you actually click through and read the CRL report they're quoting, you'll notice that they're misusing the statistics. ZestCash claims that the CRL reports that 80% of payday loans are rollovers, but when you click on that link, the CRL page you're taken to doesn't give that statistic anywhere. I've only skimmed the full report, but I haven't been able to find where they're getting that number from. I'm left highly dubious of the claim that the average payday loan is rolled over 7 times, though, given that the report does explicitly state that the average number of transactions per borrower who takes out more than one payday loan per year is only 9 (and 20% of people who take out payday loans only take out 1 per year, and aren't counted in that group).
Second, ZestCash allows partial repayment. This is critical, as requiring full repayment is a major factor in forcing payday loan customers to rollover their loans, incurring additional fees and leading to additional loans. Partial repayment is far more likely to result in a customer who can actually pay off their loan and is not trapped in a cycle of debt.
But they also require a minimum of a two month term, and I can't find any indication on the site that they let you pay off the loan early to avoid additional interest accrual.
Third, ZestCash further increases the chances of repayment by allowing flexibility in both amount and length of the loan.
That's what they claim. Hard to state it as fact just yet. And if the chances of repayment are increasing, shouldn't the APR be going down? The justification for such high rates is supposedly that these are such high-risk loans.
Anyone approved at ZestCash gets a personal representative who will work with the customer 1-on-1 for the life of the loan
A part of what makes me so mad about this site is that they're posturing themselves as a caring, responsible alternative that's going to hold your hand through this process. If you care and are responsible, you're not going to charge such usurious rates. Period.