Companies that are Native American tribes and operate on tribal land offer tribal lenders installment loans. Online loan applications are accepted by Indian tribes and they offer short-term loans.
What are tribal loans?
Payday loans can be replaced by tribal loans. Attention! These loans are not more attractive than traditional payday loans just because they are designed and promoted in this manner. These loans are often targeted at people who need emergency funds fast, but they may not be the most appealing option because they can be expensive.
What is a tribe lender? This lender also has a controversial past. Many of these lenders claim sovereign status. This means that the federal and state payday lending guidelines are not applicable to them. To ensure fair lending practices, be aware of interest rates and carefully read the terms and condition of the loan. Some states do not recognize tribal lenders as appropriate places to borrow money. Check your state and local laws to find out if you are eligible.
These are the top 5 facts about tribal lending that you should know if you’re still thinking about applying for one or want to learn more.
- Tribal lenders are often exempted from federal and state regulation
Tribal lender financial services, like payday lenders, are notorious for charging ridiculously high fees. According to the Consumer Financial Protection Bureau, these loans can lead to financial stress and debt traps.
While states have recently begun to curb these predatory practices in some cases, many tribal lenders argue that they are not covered by these laws. They claim exemption because they are owned by tribal nations and have sovereign immunity from the regulations. It is important to verify the guidelines of your state for tribal lending.
2. Tribal lenders charge high interest rates
Tribal loans are often very costly and can have high interest rates for short-term loans. They often charge additional fees and higher interest rates.
According to the CFPB, tribal loan APRs range from 400% to 950%. A small loan amount of $800 could end up costing the consumer more than $3,300 over the 10-month term. These high interest rates can make quick cash seem attractive, but they can end up having dire consequences for your bank account.
3. Tribal loans can be short-term
Although tribal loans can be compared to payday loans in terms of repayment, they are different. These loans are structured as installment loans. Payday loans must be repaid once you get your next paycheck.
Standard terms for tribal lenders are usually less than one-year. Due to the high interest rates, these loans may be easier to repay. Based on your loan agreement, the faster you repay it, the lower interest rate you’ll pay.
These loans should not be used for long-term financing, but they can be used to fund short-term credit
4. Tribal loans can be used for small amounts
Tribal loans are typically for small amounts. These loans can be used for urgent funding such as car repairs or medical expenses. They are also great if you have a need for money fast. Once approved, funds are available within the next business day.
5. Online applications are available
Online applications are accepted by tribal lenders. You don’t even need to be a tribal member to apply online for a loan. You can also expect fast funding. If you have poor credit, these loans may be an option. Tribal lenders may require you to have a credit check. This could impact your credit score.
There are alternatives to tribal loans if the high price is not appealing.
- Payday alternatives loans: These are short-term, installment loans that have a 28% interest cap. To be eligible, you must be a member in good standing of a federal credit union.
- Personal loans for small amounts: If your credit score is excellent, you might be eligible to receive a personal loan at a lower interest rate.
- Credit cards: Even though they charge higher interest rates, credit cards can be a great option. These interest rates are almost always lower than those offered by tribal lenders.
- Although payday loans are not often recommended, they can still be more affordable than loans from tribal lenders.
You should be careful if you require emergency cash. You could fall into debt traps and be subject to predatory lending practices if interest rates are high. These loans are provided by a tribal lending entity that is under the control of a sovereign nation within the US. They may have different financial laws than the rest. Many offer service only Monday through Friday, from 8 AM to 4:30 PM. Be aware of the closing times and make your timely payments.