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Doshound aims to help you make informed financial decisions. Learn about payday loans, installment loans, and financial products in general. Learn about borrowing, fees, rates, and payments. Our articles can help you make informed financial decisions to protect yourself and save money. Get the facts so you can make a decision that's best for your situation.

Are Payday Loan Users Stupid?

May 14, 2013 - Hound NewsPayday LoansResearch
Why would a payday loan user borrow at a 651% APR? The conventional wisdom is users are unsophisticated. The Payday Hound finds otherwise. Learn more.

Why would anyone borrow $300 with a 651% APR? They must be stupid. At least that appears to be the unspoken assumption at the heart of today's payday lending legislation debate.

Recent legislation from Texas to California focuses on banning payday lending. This ban inherently assumes that the 12 million people who take out ~$7.4 billion in payday loans every year are incapable of making intelligent decisions and must be protected by removing this choice.

There is no question that many payday loan users are making poor decisions. In fact, The Consumer Finance Protection Bureau (CFPB) finds that over 66% or 8 million people use payday loans incorrectly as longer-term loans instead of as a short-term credit tool. This is unacceptable, but is it a result of bad decision making skills or, as the CFPB states, a question of whether consumers understand the costs, benefits, and risk of using these products?

The correct answer is probably a bit of both, but 66% of a population making irrational decisions suggests to us a lack of understanding is a big driver. Our data support this conclusion.

The attached chart shows the higher ranked a lender is, the more visitors the lender gets from our site. The same is true with price – the lower the price, the more visitors. The only exception occurs between the top ranked lender classes. Here, users appear to be willing to pay more to use a state licensed lender rather than an unlicensed lender. This supports the conclusion that payday borrowers are not only capable of making rational decisions but of making fairly sophisticated trade-offs when provided tools and information.

What is odd to us is why any borrower goes to lower ranked, higher cost lenders. One hypothesis is this occurs because in states where payday lending is banned, licensed lenders are not an option forcing borrowers to go to higher-priced, riskier lenders. We will examine this hypothesis in more depth in a future post.

Doshound's preliminary results show payday borrowers do make rational decisions when provided with tools and information. This makes sense; after all, can one imagine trying to select a mortgage in an environment where there is no truth-in-lending regulation, anyone with capital can make mortgage loans, and there are no consequences for lying? We imagine if this was the case, 66% of prime borrowers would also make poor decisions.

Doshound suggests that legislators consider focusing more on creating consistent, cohesive, enforceable regulation in the short-term lending market, much like prime borrowers enjoy in the credit card and mortgage markets, rather than reducing choice by banning a product. Just like banning unregulated mortgages in the example above does not address the need for mortgages, banning payday loans does not solve the need for short-term credit. We believe regulation that focuses on creating a short-term, loan market that is fair, transparent, and competitive is more helpful to borrowers than reducing choice.

Payday Loans Too Taboo To Touch?

March 25, 2013 - Hound NewsPayday LoansResearch

Search engines, news sites, and press release companies have limited efforts to publicize payday lending sites. Payday Loans are too taboo to touch! Although these actions are designed to protect consumers from predatory lending practices and are well intended, we believe efforts to censure payday lending sites may hinder rather than help the clean up of unscrupulous lending practices in this industry.

We aim to provide informed, fact-based reviews and services to consumers. We believe more reviews and comparison tools help consumers make educated decisions while encouraging a wider array of product choice. Ultimately, we believe consumers, when armed with information and trade-offs, will educate themselves, avoid inferior or deceptive products, and use financial products to their advantage.

Opponents of payday lending believe the best way to protect consumers from high fees and deceptive practices is to ban the product completely. We do not think banning the product is the best solution for consumers. We believe high pricing and deceptive practices are two different problems requiring two different tools. Pricing is best left to market forces. If payday loans are too expensive compared to other options, the industry will disappear on its own. Transparency highlights price differences but, today, it is very difficult to comparison shop in the payday lending space as information is limited or even censored. Deceptive practices are best addressed through regulation. Clear rules and regulations and the active removal of deceptive and illegal lenders creates a level playing field letting consumers trust the system. Bringing more transparency to regulation not only warns consumers of unscrupulous lenders, but also helps legitimate businesses plan and reduce costs. We believe banning a product is a blunt tool that leaves consumers with less choice. Instead, specific tools should be used to address the problems they are designed to fix: market forces for managing pricing and regulations for leveling playing fields.

Payday loans and other short-term loans are expensive credit products but millions turn to them every year. We support building infrastructure and programs, both public and private, that reduce the need for these expensive products but banning products is unhelpful. For individuals who turn to payday loans because they have exhausted all their options, we should be doing everything we can to provide more options not less. The Payday Hound believes that regulation, enforcement, and transparency will do far more to providing immediate options to consumers than blunt tools such as banning or censorship.

For more information on our views see our article More Transparency in Payday Lending in the American Banker.

Thanks and feel free to send us your thoughts and suggestions!

What Are Direct Payday Loan Lenders

January 03, 2013 - Installment LoansPayday Loans
Direct payday loan lenders are companies that make payday loans directly to you. Learn more and find the best rates at The Payday Hound.

Direct payday loan lenders make are companies that actually make payday loans. Understanding the payday loan process and other players in the process will help to explain this better.

The basic steps for making a payday loan are,

  1. Marketing the Loan. Finding people that want and can qualify a loan.
  2. Getting an Application. Getting the applicants information.
  3. Underwriting. Deciding yes or no to making a payday loan.
  4. Funding. Having the money to lend to the borrower.
  5. Account Management and Collections. Getting your cash into your checking account, managing your account, calculating fees, call centers and collecting payment.

Direct Payday Loan Lenders generally manage all the steps listed above. Sometimes they do the entire process themselves and other times they partner with companies to help them. CashNetUSA, Check City, and ACE Cash Express are examples of direct payday loan lenders. They manage all the steps of the above process. You can apply directly for a loan from any of them. These two companies also work with other partners to help them with the different steps. For example, some direct payday loan lenders work with networks that help to market and/or gather applications for them. These networks act as a matching service. A network may work with multiple direct payday loan lenders directing borrowers to their website’s or even taking applications and then forwarding qualified applications on to direct payday loan lenders. For example, The Payday Hound works with T3 Leads and RoundSky. When you apply for a payday loan from our site your application will be matched different direct payday loan lenders via direct relationships we have with lenders and by going through these two networks.

Underwriting is generally done by the direct payday loan lenders themselves. This involves setting loan pricing and acceptance criteria. Usually, this step involves statistical analysis to understand what attributes in a loan application identify people that will pay them back. The fourth step is funding the loan. In order to give you money, the payday loan lender must have money to give. Sometimes payday loan lenders take out bank loans to have money to lend to you. For example, Wells Fargo makes loans to some payday loan companies. The payday loan company then lends the money to you but if you don’t pay the loan back then the payday loan company must use their own money to pay back the bank. The final step is the operations and collections. This involves the actual mechanics of transferring money into your checking account as well as making sure you pay the loan back. Sometimes direct payday loan companies will outsource this step to companies that have the software and staff designed to do this.

The advantage of working with a direct payday loan lender is you know exactly to whom you are applying. In addition, they generally provide you a list of rates and terms before you even apply for a loan. The disadvantage of applying to direct payday loan lenders is that you need to apply directly to each one individually. So if you are rejected by one lender you must fill out another application each time you apply to another lender. When you apply through a network you only need one application. The disadvantage is that you do not get to see your rate or terms until after you have been approved. But remember you never have to accept a loan and never should accept a loan, even if approved, until you have reviewed, understood, and agreed to the loan terms.

Who Is Jupiter Funding Group

December 28, 2012 - Payday Loans

The short answer is we don’t really know Who is Jupiter Funding Group. There is very little information on their website and a manager never returned our call. If anyone has direct experience with this payday lender please let us know so we can inform other borrowers.

We get a lot of searches for Jupiter Funding Group so we decided to update our review of this payday lender. We initiated our rating earlier this year of Jupiter at two stars and our recent review maintains this ranking.

Unlicensed Lender?

It appears Jupiter Funding Group is an unlicensed lender incorporated in Delaware. If you are sure you are able to pay off on time then, like most all other payday lenders, everything should go fine but if you decide to rollover your loan or have troubles paying back your loan Jupiter appears to operate unregulated. We suggest using a four or five star rated company and one that is licensed in your state. You can use our loan finder to the left to find a company that operates in your state.

Limited Information, Unreturned Phone Calls

There is very little information available on Jupiter Funding Group. We checked the records of State of Delaware and they are listed as an LLC but that doesn’t really tell you very much. Their domain registration appears to have been in place since January 2010 and they have no record with the Better Business Bureau.

We tried to call Jupiter and speak to someone to learn more about their group but were given what appears to be incorrect and then evasive answers. The first person we spoke to offered to help us with a loan. When we asked if they were a licensed lender we were told they make loans in every state but Delaware. When we asked if that meant they were licensed in every state we were told yes. When we pressed further (knowing that many states do not allow payday lenders and thus it’s impossible to be licensed in every state) the representative said they don’t know what licensed means but knows that they provide payday loans in every state but Delaware. As we tried to get more information we were asked why we wanted to know this information. We told them we were a review site looking to learn more. At this point the representative became very evasive and said we needed to speak with a manager. So we asked to be transferred to a manger. Another person came on the line and asked who we were and why we were asking questions. We told them we were a review site and wanted to better understand Jupiter Funding Group for our readers. We tried to ask again whether they were licensed but were told we must speak to a manager and one would call us back. We gave the person our phone number and email and have not heard back. This was three weeks ago.

Based on this interaction and lack of information on Jupiter’s website we are guessing they are an unlicensed lender offering payday loans. They are incorporated in Delaware but do not offer payday loans in Delaware maybe so they don’t violate Delaware laws. This is not clear but Delaware does allow payday lenders and is relatively lenient relative to other states, some of which outlaw them outright, so that doesn’t quite add up either.

Additional Information?

We would like to better understand Jupiter Funding Group’s approach to lending, legal status, and size. We also would like to know if they are operating as a licensed lender, offshore lender, tribal lender or state lender. Additional information on how they handle collections would also be useful. If anyone has direct experience with Jupiter Funding Group or if we’ve misrepresented anything here please email us or leave a comment below.

The Payday Hound believes in improving transparency in the payday lending space. We believe regulations can help but are a fairly blunt tool and when done to an extreme can even increase the costs of the lending until it is detrimental to consumers. We believe clear market transparency combined with regulations can improve the payday lending space for consumers and businesses alike.

Prepaid Card Calculator

November 28, 2012 - Cards
Use our prepaid card calculator to find the best prepaid card for you. Vary your usage of ATM's and other features to calculate your total cost of ownership for different prepaid.

Prepaid cards have many different fees and the best card varies based on how you use it. Our prepaid card calculator takes inputs on how you plan to use the card, automatically calculates the different fees, and ranks the cards based on cost. The resulting table also provides detailed reviews and a fee breakdown under “More Info.”

Prepaid card fees have come down for the most competitive cards. The main variations for the top cards have to do with ATM withdrawals, card reload and customer service. There are two ATM withdrawal fees: one charged by the owner of the machine and one charged by the card issuer. The cheapest cards do not charge fees for either. The next area of differentiation is card reload. To put cash on your card you generally need to use a third party service like a MoneyPak. These services charge the same fee for all cards but some cards allow you to reload your card at their stores for a lower fee or no fee. Note that these fees only relate to cash reloads. Direct deposit reloads are free. The final area of differentiation is customer service. Many cards charge a fee for calling customer service, others provide a couple free calls a month and some have free customer service. It can be difficult to compare cards across these different fees. The prepaid card calculator will calculate these fees automatically.

Here is a more detailed explanation of usage fields:
Direct Deposit: Will you reload your card with direct deposit or not. All cards provide direct deposit reloads for free so don’t be sold by “Free Direct Deposit” as this is free with every card. The reason we include it here is that some cards will actually waive fees if you do direct deposit.

Purchases: How many purchases will you make a week? This attribute is not as important anymore. In the past some cards would charge you every time you made a purchase. Today, the top cards will not charge you to make a purchase.

ATM Withdrawals: How many ATM cash withdrawals will you make? There are two fees here: one charged by the card issuer and one charged by the ATM machine owner. Some card issuers waive both fees on ATM machines they own. The prepaid calculator separates out between in-network and out-of-network machines to differentiate whether you make withdrawals from the owner’s machine or not. To find the location of each card’s machines click on “More Info” under each card to find a link to their network of machines.

Loading Your Card: How much you will deposit in total each month and how many cash loads will you make. How much you will deposit is your total deposit. It includes direct deposit AND cash loads. Many cards reduce and even waive fees depending on how much money you deposit on your card. This is because the cards earn a small fee from merchants when you use the card. So the more you use the card the more money they will make. The number of times you do cash loads lets the calculator estimate your fees for cash loads. The calculator assumes you will use the cheapest method to load your card.

Account Maintenance: How many times will you check your balance at the ATM? And how often will you call customer service? Most cards will charge you if you check your balance on an ATM. We suggest you check balances online where it is free instead of going to an ATM. The cost of customer service calls varies greatly among cards. Some charge up to $3 a call while others are free. .

Time: How long do you plan to hold this card? Some cards charge activation or one-time fees. Knowing how long you will hold the card lets the calculator figure out the effective weekly cost of these one-time fees.

Once you set your usage click “Find Card” and the calculator will show a list of cards ranked by cost. Click on “More Info” to see a detailed review, cost break down, and fee schedule for each card. The cost breakdown will vary based on your usage. For example, customer service calls may be free if you do direct deposit but have a fee if you don’t have direct deposit. So expect to see this to change as you change your usage behavior. You can adjust the usage to see how cards re-rank.

Prepaid cards do not build credit. If you have bad credit and are looking to build your credit we recommend secured credit cards. They are available to individuals with no or bad credit and they do build credit by reporting to the three major bureaus. To learn more visit What is a Secured Card and The Best Secured Cards.