I recently saw an ad on TV for an installment loan from a company named CashWell. The ad went out of it's way to point out that this was NOT a payday loan, it was an installment loan with little or no paperwork. Sounds too good to be true, walk into a storefront and walk out with $1500 without a lot of paperwork or one of those nasty payday loans.
So, I checked into CashWell installment loans. According to this website, the rate on the loans can be as much as 248%. Rates are lower for higher loan amounts, but in my state the lowest rate is 207%. Say for example, you borrow $1000 and agree to pay it back on a bi-weekly basis over the course of the next year. My amortization schedule generated by Excel shows a payment of $92.20. At the end of the year you will have paid $2,397.11 for this loan. Not a bad return for CashWell.
I've spoken before about payday lending and it's cousin title lending (see here and previous posts). This new type of "installment" loan falls into the same category. At best, it's something to be avoided. At worst, it's something to be outlawed.