U.S. Bank, regarded as one of the largest banks in United States is offering high cost loans that are small but according to the bank will prevent customers from reeling under the debt burden.
These loans typically range between USD$100 and USD$1000 and can help you to meet your unexpected financial obligations that might include a sudden breakdown of your vehicle and paying for medical bill, or for that matter any unexpected financial obligation that you have to fulfill. However, the fee is more or less same as the annual rate of interest, which is 70%.
According to the spokesperson of the bank, the main objective of creating this financial product is to serve as an alternative to payday loans. To explain in brief, payday loans, as we all know are loans of small amount with very high rates of interest, which may sometimes be higher than 400%. Also, these loans can be availed from the website of any online payday loan lender. You can also avail the payday loans from a direct lender. However, an important aspect you must keep in mind while repaying payday loan is concerned is that you must repay the loan in full when you receive your next paycheck.
Deposit advance loans
Aside from U.S. Bank, other financial institutions like Regions Bank and Wells Fargo offered these deposit advance loans. The loans were expensive and have to be repaid in full when you receive your next paycheck, a trait that is similar to the conventional payday loans.
The biggest advantage of payday loans is that you can avail these loans even if your credit score is something you cannot boast about. However, these financial institutions had to give up selling these loans because of the restrictions that were imposed by the regulatory bodies, which was way back in the year 2013.
A New Horizon- Simple loans
In the current year, 2018, however, the Office of the Comptroller of Currency, allowed banks to extend small loans. U.S. Bank calls it the “simple” loans and has described them as ‘user-friendly’.
As far as repayment of the loans is concerned, you can do so in 3 equal monthly installments instead of a lump sum, which oftentimes proved to be cumbersome for many borrowers. Another aspect of these ‘simple loans’ is that you must wait for a period of 30 days or a month before you can apply for such loans again.
The customer will not have to incur any payment in the event of an overdraft. This can be better understood with the help of an example. Let us say, you have availed a loan of USD$400, you will have to shell out a fee of USD$48, which is equivalent to the annual rate of interest of 71%.
How to apply for ‘simple loans’
If you are interested in availing such loans, you can do so by applying online or even from your hand held devices. The process of underwriting is fully automated and you get an instant decision whether you are eligible for the loans or not.
It is essential to have a checking account prior to applying for the loan for at least 6 months and you must also have recurring direct deposits in order to fulfill the criteria for applying for the loan.
A credit check is carried out prior to approval. The habit of repayment of borrowers is made note of and the same is conveyed to the credit bureaus. The biggest advantage of this exercise is that it will help you in improving your repayment habits and make you financially responsible with the aim of boosting your credit score.