Home Restaurant Profit A Private Equity Alum Guide to Better Payday Lenders

A Private Equity Alum Guide to Better Payday Lenders

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A little early experiment designed to attract borrowers to the site attracted hundreds of clicks every day from Google from people looking for cheap payday loans. Lenders approached NerdWallet with an offer to pay it $ 60 in commission on a $ 200 loan, knowing that many borrowers end up repeatedly rolling over their loans into new loans and paying effective annual interest rates well in. the three digits.

“I asked them if they would take the $ 60 and give that rebate to the borrower, but they didn’t,” Zhang said. “Their business model is based on loyal customers, so if someone pays off their loan, they don’t make any money. “

Ultimately, NerdWallet opted for a pro bono effort where it would earn no commissions and send consumers only to nonprofit lenders with lower interest rates or government organizations that offer assistance. short term. It started on Friday, with links to 44 entities in California and Texas. The company plans to add more over time.

While NerdWallet won’t be making any money in the short term from its payday loan redirect, it is well aware that people in financial difficulty could be customers next year. “If we do it right, we can rehabilitate people in difficult circumstances,” Zhang said. “In six months, when she needs a credit card or wants to start investing, she will come back. This is the best type of bet we can make.

About those credit cards: There’s something pretty rich about a company like NerdWallet, which collects commissions from credit card issuers who charge double-digit interest rates, funneling those commissions away from the credit card companies. other customers charge triple-digit effective interest rates that payday lenders charge. But hey, at least NerdWallet isn’t using that money to push more credit cards.

Mr. Zhang understands what it looks like. “We fight with her every day,” he said. For him, the benefits of credit cards outweigh the problems they cause for the millions of people who use them without going into debt for years.

This is not something, however, that he can say about loan deals that target the unlucky people. “There is no example,” he said, “where I would encourage people to get a payday loan. “


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