Obama In | Payday Loans or Installment Loans-Which will Prevail?

The election of Barack Obama to the office of President of the United States of America is indeed a landmark moment in American history – and for the history of payday loans.

As the first African-American president, Obama strikes a blow against hundreds of years of oppression and misery. Civil rights for all people in America has been a difficult struggle, one which will continue. However, thanks to a former Illinois senator, the country may be moving that much closer to finding that level playing field.

But his economic plan leaves something to be desired in some areas

Obama’s economic plan focuses on these major pillars:

1. Jumpstarting the stagnant economy
2. Providing middle class tax relief
3. Fighting for fair trade
4. Investing in manufacturing and creating “green” jobs
5. Creating new jobs through increased national infrastructure investment
6. Creating new technology jobs
7. Supporting small business, startups and labor
8. Protecting homeowners and cracking down on mortgage fraud
9. Curbing predatory lending and reforming bankruptcy laws
10. Improving the work/life balance for families

Let’s take a close look at that bold one above, number nine. Particularly the “curbing predatory lending” part. As we’ve already seen in Ohio, about 6,000 people will be losing their jobs thanks to new legislation, this in a state with the second highest unemployment rate in the nation.

But what Obama wants is to extend a 36 percent APR cap on all lending. That amounts to about 1.4 percent interest on two-week fast payday loans, which means about $1.40 in fees per $100 loaned. That will not sustain the industry, forcing scores of lenders to close their doors.

Which will lead to increased unemployment in a time when America can ill afford it. The U.S. economy needs to be stimulated by continued spending and use of credit, but if more and more people are put out of work, stagflation will continue.

That helps nobody

What options does that leave consumers with less than perfect credit who need payday loans for bad credit? Little to none in the way of legitimate loans like those of the businesses that will be forced to close.

But wait!

What’s that on the horizon?

It’s short term installment loans!

This is a different lending product that gives consumers even greater flexibility. Obama could hardly call them “predatory,” although America’s 44th President does seem to think that useful short-term loan products that clearly disclose their information and urge consumers to take out only what they can easily repay are “predatory.” Nobody’s perfect, eh?

With these installment loans, consumers can repay in full at any time prior to their loan’s stated maturity date – which they typically choose at the outset – or they can make a set number of payments (typically around 20) over a period of weeks, normally bi-weekly. Costs are affordable and give the consumer much more of a safety net if they are unable to pay their loan in full on the two-week maturity date most payday loans have. Short-term lending isn’t going away… it’s changing, getting better for me and for you.