Many Tennesseans looking for fast cash have heard of payday loans. An earlier blog post discussed how these loans are not a good idea and should be avoided. However, a new type of loan is available in Tennessee and may be just as disastrous as a payday loan.
They are called flex loans and are essentially an open-ended line of credit. Rather than borrowing against an individual’s personal check, as is the case with a payday loan, flex loans allow borrowers to withdraw money at any time up to a certain amount. However, similar to payday loans, interest rates for flex loans can be in the triple digits. According to New Channel 5, annual interest rates for flex loans when daily fees are added in can be in the range of 279 percent.
While traditional payday loans are capped at $500, flex loans allow consumers to borrow much larger sums of money. However, once that amount is withdrawn, the loan balance can be near impossible to pay back. Borrowers have reported owing large monthly payments, with very little of that amount going toward the loan principle and the rest going to interest only. The Tennessean reports that while efforts have been made to prevent check cashing and payday loan stores from operating within a certain distance from each other, some companies are finding a way around this by offering flex loans instead.
So while a flex loan may be a better alternative than a payday loan in some circumstances, Tennesseans who are short on cash should think carefully before taking out such a loan and should be sure to do their research ahead of time.