California Law Paves Way for More Credit-Building 0% Loans

California broadened the reach of nonprofits that target low-income borrowers who lack the credit standing needed to obtain a traditional loan, enacting a law that lets the organizations lend as much as $2,500 interest free without a license.

Clients of groups like the San Francisco-based Mission Asset Fundare often unbanked, underbanked or have low credit scores. Under the new law, payments must be reported to companies that create the rankings, such as Experian and Equifax. By repaying in full and on time, borrowers can create the track record they need to qualify for regular loans.

A few nonprofit groups around the U.S. provide low- or no-interest micro loans to people whose financial options are limited and may otherwise turn to payday lenders, leading to a mire of mounting debt at exorbitant rates. The U.S. Consumer Financial Protection Bureau estimates 12 million Americans use payday lenders and says most get trapped into rolling over a two-week loan at least once before paying it off at annualized interest rates that can surpass 400%.

“Everyone in California, regardless of their income level, and regardless of their background, deserves access to the financial mainstream,” state Sen. Lou Correa, a Santa Ana Democrat who introduced the measure, said in a statement. The law, signed Aug. 15 by Gov. Jerry Brown, “gets government out of the way, and provides needed flexibility to nonprofits that are offering a bridge to Californians whose incomes or credit scores have limited their access to affordable financial products,” the senator said.

Credit-builder loans

The statute clarifies the legal standing of nonbank organizations that make small loans to help borrowers create or enhance their credit rating. According to legislative research, more than 12 million payday loans were made in California during 2012, compared with about 265,000 unsecured consumer loans of under $2,500. The Mission Asset Fund ‘s lending program, begun in 2008, has facilitated more than $3 million in debt and helped borrowers to an average 168-point improvement in their credit scores, the research shows.

The San Francisco fund works with 19 nonprofit organizations, including three in Los Angeles and others in states such as Nevada, Oregon, Massachusetts and Minnesota. Organizations in several other states also operate credit-building loan programs, according to Consumer Action, although some charge interest.

Under the California law, nonprofits can get a lending license exemption to make unsecured personal installment loans at 0% interest and with origination fees initially capped at 7% or $90, whichever is smaller. Late payment fees can’t exceed $10. Loan terms can’t exceed 90 days for amounts less than $500, 120 days for up to $1,499 and 180 days for debt between $1,500 and $2,500. The borrower’s debt to income ratio can’t top 50%, or 25% for those with unverified income, and the payments made must be reported to at least one credit bureau.

So now more Californians can skip payday lenders and get interest-free, credit-building loans thanks to a law that lowers the barriers to people helping each other reach a better future.

Loan sign image via Shutterstock

Source Article :http://bit.ly/1tqo9wV

Read More

California Law Paves Way for More Credit-Building 0% Loans

California broadened the reach of nonprofits that target low-income borrowers who lack the credit standing needed to obtain a traditional loan, enacting a law that lets the organizations lend as much as $2,500 interest free without a license.

Clients of groups like the San Francisco-based Mission Asset Fundare often unbanked, underbanked or have low credit scores. Under the new law, payments must be reported to companies that create the rankings, such as Experian and Equifax. By repaying in full and on time, borrowers can create the track record they need to qualify for regular loans.

A few nonprofit groups around the U.S. provide low- or no-interest micro loans to people whose financial options are limited and may otherwise turn to payday lenders, leading to a mire of mounting debt at exorbitant rates. The U.S. Consumer Financial Protection Bureau estimates 12 million Americans use payday lenders and says most get trapped into rolling over a two-week loan at least once before paying it off at annualized interest rates that can surpass 400%.

“Everyone in California, regardless of their income level, and regardless of their background, deserves access to the financial mainstream,” state Sen. Lou Correa, a Santa Ana Democrat who introduced the measure, said in a statement. The law, signed Aug. 15 by Gov. Jerry Brown, “gets government out of the way, and provides needed flexibility to nonprofits that are offering a bridge to Californians whose incomes or credit scores have limited their access to affordable financial products,” the senator said.

Credit-builder loans

The statute clarifies the legal standing of nonbank organizations that make small loans to help borrowers create or enhance their credit rating. According to legislative research, more than 12 million payday loans were made in California during 2012, compared with about 265,000 unsecured consumer loans of under $2,500. The Mission Asset Fund ‘s lending program, begun in 2008, has facilitated more than $3 million in debt and helped borrowers to an average 168-point improvement in their credit scores, the research shows.

The San Francisco fund works with 19 nonprofit organizations, including three in Los Angeles and others in states such as Nevada, Oregon, Massachusetts and Minnesota. Organizations in several other states also operate credit-building loan programs, according to Consumer Action, although some charge interest.

Under the California law, nonprofits can get a lending license exemption to make unsecured personal installment loans at 0% interest and with origination fees initially capped at 7% or $90, whichever is smaller. Late payment fees can’t exceed $10. Loan terms can’t exceed 90 days for amounts less than $500, 120 days for up to $1,499 and 180 days for debt between $1,500 and $2,500. The borrower’s debt to income ratio can’t top 50%, or 25% for those with unverified income, and the payments made must be reported to at least one credit bureau.

So now more Californians can skip payday lenders and get interest-free, credit-building loans thanks to a law that lowers the barriers to people helping each other reach a better future.

Loan sign image via Shutterstock

Source Article http://ift.tt/1y39EC7

Read More

baz

qux

Source Article http://ift.tt/1y39EC7

Read More

baz

qux

Source Article :http://bit.ly/1qpqMvS

Read More

foo

bar

Source Article http://ift.tt/1y39EC7

Read More

foo

bar

Source Article :http://bit.ly/1vejQps

Read More

Personal Checks Run Out? There Are Actually Alternatives to Reordering

Even though personal checks accounted for less than $20 billion in U.S. transactions in 2012 – down from $40 billion in 2000 – many people still rely on that old-fashioned payment method, particularly in certain situations, like paying rent or sending money to family and friends. That can get expensive when the blank drafts run out, though.

For those who only write one or two checks a month, online-only banks like Simple as well as financial institutions and companies like Venmo, PayPal and Square offer alternatives to ordering 80 or 100 checks at a time. Here are some of the options to buying box-loads of the documents:

The single check

Simple, a Portland, Ore.-based online bank founded in 2009, provides a creative solution to customers who need to write occasional checks. To request a draft, an account holder simply fills out the information through the website, and the bank sends a printed check to the payee, signature and all, for free. The entire process takes about three to five business days, though, so it requires a little planning ahead. As another payment alternative, the bank also offers free electronic funds transfers, which clear in two days.

The cashier’s check

Many banks and credit unions let customers buy cashier’s checks with no service fee. The only difference between one of these bank-issued drafts and a personal check is that the issuing financial institution backs the face value of cashier’s checks it has issued, while a personal draft relies on the account holder to back the payment.

Find out which banks give users access to free cashier’s checks and what the monthly limits are before fees are applied (for some banks and credit unions, it’s three checks; for others, 10). In most cases, getting a cashier’s check must be done in person. However, some institutions allow consumers to order online.

The wire transfer

Sending money electronically between financial institutions is old hat, but today many banks and credit unions have reciprocal relationships, allowing customers to move funds from one account to another online. Some banks don’t impose fees for this service, while others may charge as much as $80, depending on the amount being transferred, and the receiving bank may also hit you with additional costs. Generally, international wire transfers require the recipient’s name, account number and the bank routing number of that person’s bank or credit union. For electronic transfers between accounts in U.S. banks, simply providing the receiving party’s mobile phone number or email address can be all that’s needed, and it’s often free.

Not only is this more affordable than purchasing checks – it’s also less of a hassle. Payments may take a few days to clear, so it’s a good idea to submit the transfer early on to avoid being late.

The third-party transfer

For sending money to friends and family, consider using a third-party vendor like PayPal instead of sending a personal check or electronic transfer. Users only need to supply the recipient’s email address to complete a transaction. The only caveat: PayPal charges a service fee of about 3% when debit or credit cards are used. The fee is waived, however, for domestic bank transfers and when the money comes out of a PayPal account. While 3% isn’t a lot when the amount involve is small – just $3 for a $100 transfer – it can add up quickly for larger sums.

Square, the money-transferring app, offers a cost-effective alternative: for electronic transfers under $250 per week, there’s no fee. Users can verify their identity and upgrade their accounts to increase that limit to $2,500. With sophisticated encryption and anti-fraud algorithms, Square’s online transfers can offer even more security than checks.

With Venmo, a mobile app, users can also transfer money free of charge with only an email or phone number. Although customers pay a 3% fee for credit card payments, transfers between banks and most debit cards are free. This payment system isn’t made for all transactions, though; Venmo is designed for personal payments among acquaintances, not between consumers and merchants.

Heading into history

As consumers gravitate towards plastic and online payments, personal checks are becoming artifacts of the past. So why buy them by the box? Finding effective paperless alternatives can unclutter your financial life while saving a little money on the side. But if you do need a paper draft, you still have some free options.

Checkbook image via Shutterstock

Source Article http://ift.tt/1y39EC7

Read More