| Short-Term Loan Customer Benefits |
 |
| Short-term loans have been available for many years. Many
groups characterize the practice as improper due
to the “high” fees associated with the
loans. However, when you truly look at the alternatives
a customer has it becomes clear that a short term
loan may be the best alternative for some customers.
Below we depict a very typical scenario where a
consumer will get charged $30 NSF fees from its
bank and $25 returned check fees from various merchants.
These particular scenarios show where a consumer
may pay $110 for fees vs. $30 for a short term loan.
Some of the additional benefits of the loan may
include the following: |
| •
|
Better
relationship with merchants – less embarrassing
(this may lower a consumer's long term costs
with merchant) |
| •
|
Better
relationship with bank – excessive NSF
scenarios may terminate or make bank relationships
costly |
| •
|
Confidentiality |
| •
|
Traditionally
lack of payment does not hinder credit score
with major bureaus |
|
|
| Scenario
#1 – Customer bounces two checks due to being
short $100 in their bank account |
| Overdraft
Scenario |
Check
To: |
Amount |
Overdraft
charges from Bank |
NSF
charges from Merchant |
Total |
| Check
#1001 |
Grocery
Store |
$35 |
$30 |
$25 |
$55 |
| Check
# 1002 |
Landlord |
$500 |
$30 |
$25 |
$55 |
| Overall
Cost |
|
|
$60 |
$50 |
$110 |
|
| Scenario
#2 – Customer gets a short-term loan for $200
to cover necessary shortage for bills or emergency
expenses. |
| Overdraft
Scenario |
Check
To: |
Amount |
Overdraft
charges from Bank |
Fee
for Loan |
Total |
| Check
#1001 |
Grocery
Store |
$35 |
$0 |
$0 |
$0 |
| Check
# 1002 |
Landlord |
$500 |
$0 |
$0 |
$0 |
| Short
Term Loan |
Lender |
$200 |
$0 |
$30 |
$30 |
| Overall
Cost |
|
|
$0 |
$30 |
$30 |
|
