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MoneyNowUSA.com Adds Subprime Personal Loans to Help Distressed Borrowers
By Alton Gary Simpson
SCOTTSDALE, AZ-Online loan service MoneyNowUSA.com, has just added subprime personal loans to their offerings, which will enable distressed borrowers to get caught up on their mortgage payments. The new subprime loan product will allow borrowers to take out an unsecured loan for up to $15,000. The loans are designed to be repaid in four years with rates from 5% to 20% APR and are offered in all 50 states.
"Basically, they are unsecured loans and borrowers can be approved down to a 530 FICO score," said Chris K. Kay, chief executive officer, MoneyNowUSA.com. "This helps some people who may have fallen behind [on their mortgage payments] get caught up."
He added that borrowers must have sufficient income to qualify for a loan, must have no bankruptcies within the past two years and must not be too far behind - more than three or four months - on their mortgage payments. A press release from MoneyNowUSA.com states that by allowing homeowners to take out a loan even with a credit score as low as 530, more than 91% of homeowners are pre-qualified for a loan.
Mr. Kay noted that interest in his company's loans has been soaring in light of the difficulty subprime borrowers face in refinancing their homes in a stagnant housing market and the tight credit environment resulting from the climbing delinquency rate. According to the MBA's latest National Delinquency Survey, a record number of homeowners are falling behind on their payments. He said that this new loan program may be able to help borrowers avoid foreclosure, adding that consumers can use these loans to make a fresh start by restructuring their debt in a positive way.
"Most borrowers who take out these loans are going to pay about 15% [APR]," said Mr. Kay. "Only about 5% of our applicants are A-paper." He explained that most people who have a credit score above 750 probably don't need a $10,000-$15,000 personal loan because they have other means of financing available to them-most of MoneyNowUSA.com's borrowers have credit scores of 680 and below. He also emphasized that as opposed to "cash call" loans, where APR can be as high as 90%, these loans will have an APR of 20% and under. The average loan amount that the company is making is around $10,000. While noting that the loan program is still relatively new, Mr. Kay estimated that the default rate on these loans is roughly lower than 10%.
"Most of the loans are brokered out and end up at the larger financial institutions," he said, naming Citi Financial as the major funder of MoneyNowUSA.com's loans. Mr. Kay stated that MoneyNowUSA.com markets loans for four different lenders with Citi Financial being the largest. He said that the state that the borrower lives in, the amount of the loan and the borrower's credit score determines whether a loan will be brokered out or funded in-house. And citing the uncertainty about the ongoing credit crunch Mr. Kay added, "We're curious to know how much longer these types of loans are going to be offered. It will be interesting to say the least, but for now we're here for the ride and we'll see what happens."
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