Student loan repayment starting earlier for some

Attention class, there is about to be a major change in student loans.

As of today, some private loans will take much less time to pay off, which ultimately will save you money.

The bad news: Students will have to start paying those loans off - by making monthly payments of at least the interest - while still in school.

It's a radical shift for private loans offered by SLM Corp., better known as Sallie Mae, the nation's largest student lender.

Previously, nothing was due on these loans until graduation.

Under the new rules, students - or their parents - will be required to begin making interest-only payments about a month after the loan is funded, adding to the cost of college.

The payments could run as high as $550 a month on a $60,000 private loan while the student is still in school, said Mark Kantrowitz, who runs FinAid.org, a student financial Web site.

To avoid the payment while in school, a student would have to instead turn to a non-Sallie private loan, or a federal government loan, neither of which will be affected by the new rules.

Or they could make a change in educational plans.

"They might have to switch to a less expensive school or drop out," Kantrowitz said.

Dylan Rubin, 19, a University of Southern California sophomore who is an unpaid intern in Los Angeles Mayor Antonio Villaraigosa's office, would have found himself in that situation. His loans to pay for tuition and expenses are as much as $10,000 a year.

"I would not be going to USC" if the new terms were already in effect, Rubin said. "I would have picked a public college that cost less if I had to start to pay on the loans when I was in school."

Anthony Olton, 21, a senior at California State University, Long Beach, hopes to go to graduate school to become a physician's assistant. He figures tuition will be $20,000 to $25,000 a year, on top of the $30,000 he borrowed for his undergraduate education.

"I was planning to go to school full-time and make it straight through," he said. "There are a lot of classes, and I need study time."

On the upside, a typical loan under the new program will take an average of about seven years to pay off after graduation instead of about 20 years under the old rules, Kantrowitz said. Also, the total amount of interest paid during the life of the loan could be cut by about one-third.

Martha Holler, spokeswoman for Sallie Mae - which made $6.3 billion in private student loans last year - said the new rules would make it easier for students to pay off their loans and get on with their lives after college.

"We want them to be able to satisfy their loan obligation by spending as little as possible," she said, "and getting it over as quickly as possible."

Sallie Mae also hopes the monthly payment habit will help deter students from over-borrowing, possibly leading to a future default.

"When you have to write that check every month, then you're reminded of the obligation you've taken on," Holler said.

But making that monthly nut these days could slow or halt a college education.

Phillip Cabrera, 25, is in his last year at Pasadena City College and plans to start at California State University, Fullerton, in the fall. He said he would be willing to work to meet increased expenses.

"I will need student loans, but I have no job and I have been looking since December," Cabrera said.

He has applied for work at banks and restaurants but has been tripped up by the poor economy and his need to have flexible hours that fit with a class schedule.

"It's really tough," he said.

Student loan changes may shut some families out

There's a running joke about student loans: Don't ever graduate because you don't have to start paying them back until you do.

Starting Monday, that will no longer be the case for students borrowing from Sallie Mae, the nation's largest private lender to students.

Its signature loan is being replaced with a shorter-term version that requires students to make interest payments while in school.

For some families, that may push private loans out of reach in the already tight credit market.

But a benefit is that the cost of a private student loan will be cut by about 40 percent, said Jack Hewes, chief lending officer for Sallie Mae, which is based in Reston, Va.

Borrowers would also repay loans in five to 15 years, compared with the previous 15 to 30 years. Despite the shorter terms, Sallie Mae says, the monthly bills upon graduation won't rise dramatically.

The reason: The interest payments students make while in school will prevent negative amortization, in which the loan balance grows because of deferred interest.

The loans will be available for fall beginning Monday.

Everardo Amaya, 17, a senior at Spruce High School in the Dallas ISD said the monthly interest payments aren't a bad idea.

"That sounds better than paying the whole thing at once," said Amaya.

He's been accepted at an out-of-state school on a partial scholarship. But he'd like to stay in state, and his parents don't want him to get college loans. "They're all freaked out about them."

Amaya says he's heard of people being stuck with college debt for years. "They still have debt and they're, like, 40 years old and I'm, like, 'How is that possible?' "

Lisette Gil, 17, a senior at Skyline High School, also in DISD, has been accepted at the University of Texas at Austin. She has not yet received a financial aid package.

"I've been trying to get scholarships," said Gil, whose family isn't able to pay for her college, even though their income is considered too high for some types of assistance. "We're in debt," she said. "They don't even consider me for some of these scholarships."

She said asking students to pay interest on college loans while they're in school isn't a good idea. "I mean, the reason we're borrowing money is because we don't have any money. We don't have a job. It doesn't really make sense."

For Sallie Mae, the impetus for the change is readily apparent. Collecting interest payments from students while they're in school improves cash flow for the company, noted Mark Kantrowitz, publisher of FinAid.org, which tracks the college financial aid industry. The loans are also less risky because families that can't qualify under the new criteria are weeded out.

Sallie Mae expects its default rate to drop substantially with the change, Hewes said. In the last fiscal quarter, 4.5 percent of the company's private student loans defaulted.

It's not clear how the change will affect the volume of student loans. But Sallie Mae projects that it will issue $5.5 billion to $6 billion in private student loans this year, down from $6.3 billion last year.

One reason loan volume won't be significantly affected is that banks and other lenders have already tightened lending standards, Kantrowitz said.

Another potential upside of the change is that borrowers will become more aware of a private student loan's price.

"Students tend to overborrow, not realizing how much interest they're paying. With this, students will know exactly what it's costing them," Kantrowitz said.

As a result, he said, more will turn to cheaper federal loans and grants.

The Associated Press and staff writer Joanna Cattanach contributed to this report.

Breaking the Silence on Student Loans

Given the intensity, even toxicity, that typically surrounds discussions of two federal government's two competing student loan programs, the relative lack of public pushback against President Obama's proposal last month to end the lender-based guaranteed loan program has been surprising.

Little has been heard from the Republican lawmakers who have historically supported the private market (though federally subsidized) program, There has been the predictable shouting and cries of alarm from organizations that represent banks and other lenders, but even that has been relatively tame and mostly reactive.

And hardly a peep has come from financial aid directors at the thousands of colleges -- still a solid majority of all institutions -- that participate in the guaranteed loan program. In interviews in recent weeks, several said that they had major concerns about the Obama proposal and its insistence that they join the direct loan program, but they acknowledged that -- as administration officials clearly hoped -- their opposition was muted in part because the Obama plan would use savings from ending the guaranteed loan program to do things they like: ensure a regular, increasing flow of federal money to Pell Grants and direct significant additional funds to students and colleges.

Lots of discussions have taken place outside the public eye, with lenders encouraging college officials who support the bank-based program to speak up, and financial aid administrators debating whether and how to do that. On financial aid listservs, criticisms of the president's plan have been outnumbered by guaranteed loan participants asking their peers about the pros and cons of moving to direct lending.

But with members of Congress planning to move with lightning speed -- as soon as next week -- to enact legislation that would direct the Education Department to do away with the guaranteed loan program, the relative silence broke Thursday. The National Association of Student Financial Aid Administrators, which had gently expressed concern about Obama's loan proposal (amid significant praise for the president) when his budget was released last month, sent a letter to its members (following one it sent to lawmakers on Tuesday) urging Congress not to use the budget reconciliation process to mandate that the government originate all loans out of direct lending, and suggesting instead that Congress slow down and consider alternatives such as the association's own proposal for a single, hybrid loan program.

"Rather than eliminating FFELP through the budget reconciliation process, which would prevent a full vetting of alternative proposals, NASFAA asked legislators to convene a stakeholder's meeting to consider viable options that will ensure students have the long-term financing they need to meet college costs," the association's president, Philip R. Day Jr., wrote in a memo to its members.

The language in the actual letter to Rep. George Miller, the California Democrat who heads the House Education and Labor Committee, was even plainer: "We ask that the budget reconciliation process not be utilized to reform the student loan process."

Later Thursday, the financial aid group, issuing somewhat conflicting signals, sent yet another note to leaders of its state subsidiaries saying that NASFAA leaders had received "absolute assurances" from Miller and his staff that Congress would consider alternatives to the president's plan. "I want to emphasize that NASFAA's official position, particularly given the repeated assurances that have been provided regarding the commitment to continue the dialogue, is that we are not opposed to the budget reconciliation process."

Changes of the magnitude and breadth that the Obama administration proposed in the Education Department's 2010 budget plan would probably take many months to enact and even longer to carry out, and leave lots of room for the typical give and take (and compromise) of the legislative process, potentially given those who objected to the administration's approach time to propose alternatives.

But Congressional Democrats' plan to use the budget reconciliation process changed all that. Budget legislation is virtually impossible to amend and is voted on in a pure thumbs up or down way, and can usually be drafted with enough goodies for enough legislators to ensure its passage. As a result, if crafters of the legislation decide to write into the budget legislation language that directs the Education Department to head down the road Obama has pointed them down, opponents would find it virtually impossible to excise such language from the bill.

Senate committee passes payday loan bill

A Senate Committee has approved a bill that would provide a powerful incentive to make sure all payday lenders offering loans to Idaho residents are licensed.

Payday lenders provide short-term loans with high interest rates and usually cater to lower-income borrowers. Customers are supposed to repay the loan with their next paycheck. Most businesses charge about 25 percent interest.

The bill would invalidate any loan provided by an unlicensed payday lender.

Sandpoint Republican Sen. Shawn Keough told the Senate Commerce Committee Thursday that the bill would be a powerful consumer protection tool because the state Department of Finance could issue cease and desist orders and sue unlicensed payday lenders.

The bill passed with a unanimous voice vote. It now goes before the full Senate.

Unsecured loans: Easy way to overcome financial worries

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One in two fail to settle Socso education loans

Forty-nine per cent of the 3,675 recipients of educational loans from the Social Security Organisation's (Sosco) failed to pay up, said Human Resource Minister Datuk Dr S. Subramaniam.
He said Socso issued education loans totalling RM95 million to children of contributors since introducing the facility in 1997 where the interest rate was only four per cent per annum.

"Since February, the interest rate was lowered to only two per cent per annum to help more children of contributors gain higher education," he said after handing cheques to 23 recipients of Socso's benefits, here today.

He said that also from February, Socso had capped the education loan amount at RM100,000 per recipient.

He added that Socso was resorting to various measures to get the defaulters to pay up including approaching the Finance Ministry for instituting compulsory salary deductions and that going to the courts to recover the money was the last option .

Pfizer sells $13.5 billion in bonds to refinance loans covering part of Wyeth acquisition

Drugmaker Pfizer Inc. has sold $13.5 billion worth of bonds to replace short-term loans covering about one-third of the cost of its planned acquisition of rival Wyeth.

The senior, unsecured bonds were sold in groups with maturities of three, six, 10 and 20 years. IFR, a service of Thomson Reuters, said Bank of America, Barclays, Citigroup, Goldman Sachs and J.P. Morgan were among the bookrunners for the sale.

Pfizer's $68 billion cash, stock and debt deal to buy Wyeth includes borrowing $22.5 billion in a bridge loan arranged with five major investment banks. Last Thursday, Pfizer said in a Securities and Exchange Commission filing that those banks have further syndicated portions of the bridge loan to a total of 29 additional banks, with none of the banks financing more than $1.5 billion of the total.

But the bridge loans are set to expire on Dec. 31, so they have to be replaced, according to Pfizer spokeswoman Joan Campion.

"It's just replacing the short-term debt with the longer-term debt," she said.

Pfizer had previously said it might enter the bond market "to replace much of the bridge financing," Campion noted.

On Monday, the New York-based company filed a preliminary prospectus supplement with the SEC stating it would offer the bonds. Moody's Investors Service on Monday assigned ratings of "Aa2," its third-highest, to the new bonds but said they are under review for possible downgrade related to the Wyeth deal.

Late Tuesday, fellow ratings agency Fitch assigned a "AA" rating to Pfizer's debt offering, which included $1.25 billion two-year floating rate notes priced at 195 basis points above the three-month London international bank offered rate, or LIBOR, according to IFR.

The bond sale also was comprised of $3.5 billion worth of three-year fixed-rate notes, $3 billion of six-year notes, $3.25 billion worth of 10-year notes and $2.5 billion in 30-year bonds, IFR said.

Mortgage Refinance Loan Specialist Residential Finance Corp. Chosen as Finalist in Corporate Caring Awards

COLUMBUS, Ohio - (Business Wire) Residential Finance Corporation (RFC) (http://www.residentialfinance.com), a nationwide mortgage lender specializing in FHA refinance loans, was chosen as a finalist in Business First’s 13th Annual Corporate Caring Awards. Award winners will be announced during the Corporate Caring Awards Luncheon and corporate philanthropy celebration April 9th at the Hyatt Regency in Columbus.

Residential Finance Corp. President, Michael Isaacs, said, “Residential Finance Corp. employees have a warm and wonderful team spirit, a deep sense of caring and are very community oriented. Achieving finalist status in this year’s Corporate Caring Awards program is a real tribute to their efforts.”

Residential Finance Corp. and its employees actively provided volunteer and financial support for numerous charitable organizations over the past year, including: Angel Food, Big Brothers Big Sisters, Broadway Cares/Equity Fights AIDS, Columbus AIDS Taskforce, Congregation Tifereth Israel, Easter Seals, Foster Parent, Franklin County Dog Shelter, LifeTown, Majlis Khuddam ul Ahmadiyya youth organization, Matthew W. Acton Memorial, Meals on Wheels, Mid-Ohio Foodbank, National Council of Jewish Women, Ohio History Initiative, Ohio Special Olympics, Relay for Life cancer walk, SMART Foundation for Single Mothers, Suicide Prevention, Susan G Komen Foundation, Toys for Tots, and Women’s Clinic of Columbus.

About Residential Finance Corp.

Residential Finance Corporation (RFC) is the nation’s premier home mortgage lender specializing in FHA mortgage refinance. Founded in 1997 and now serving 26 states, RFC is “Full Eagle” certified by the U.S. Department of Housing and Urban Development (HUD), offering refinancing borrowers the security and great rates of government-insured home mortgage loans. RFC’s investor relationships include some of the nation’s largest and most diverse investment banks. Headquartered in Columbus, OH with offices in Tampa, FL, and numerous regional offices, RFC employs hundreds of highly-trained Home Loan Consultants with the knowledge and dedication to work closely with borrowers to help them find the right home mortgage loan options--with the best mortgage rates and terms--to meet each homeowner’s unique needs. For more information, contact Jessica Manna, CMO, at 614-255-4317.

All trademarks mentioned herein are property of their respective companies.

4 ways to secure college financing for your student

Planning on having your teen take out student loans? The credit crunch has taken a huge bite out of the private student loan business, says Mark Kantrowitz, publisher of FinAid.org. Dozens of lenders have closed shop, and loan amounts have declined 29% in the past year. What to do?

Look to government loans first. The feds have increased the limit you can borrow in unsubsidized Stafford loans by $2,000 and lowered interest rates on subsidized loans to 5.6% for the 2009-10 school year.

Count on summer jobs. Over the next four years, the federal government will gradually increase the limit on the amount of wages -- from $3,750 to $6,000 -- a student can earn before they are considered assets. (Colleges look at assets to determine the amount of aid a school will offer a student.) That means student jobs are more important than ever.

Improve your credit score. Lenders are looking for the least risky borrowers, so stellar credit is key. Bankrate.com has advice on boosting your score.

Find a great co-signer. No time to improve your score? Ask a financially secure family member to co-sign your teen's loan.

Government to Cut Interest on Student Loans

The government said yesterday that it will cut three tenths to eight tenths of a percentage point on interest for college loans.

Fifty-two billion won (34.7 million U.S. dollars) from a supplementary budget will be set aside to allow debt rollovers until the end of the year to unemployed college graduates from low-income households.

To prevent college graduates from defaulting on student loans due to difficulty finding jobs, a two-year grace period from loan repayment after graduation will begin in May.

Among measures either being implemented or considered to help college students, one is providing students living on basic livelihood grants with a full four-year scholarship from this year.

No-interest student loans that went only to students from households in or near poverty were expanded last year to include students from households in the bottom 20 percent of the income bracket. From June last year, students from households in the bottom 30 to 70 percent got their student loan interest cut one percentage point.

For male students serving in the military, a system to delay interest payments began last year.

Work scholarships granted to college juniors will also include fourth-year students this year. The amount of scholarship given to one student for a year will be raised from two million won (1,335 dollars) to three million won (2,000 dollars).

The biggest institutional change will be the introduction of customized scholarships from the second semester this year. The system was adopted based on a law governing scholarship foundation.

The Korea Research Foundation and the Korea Science and Engineering Foundation will combine their scholarship functions to provide a one-stop service for students, including loan disbursement, securing loan guarantees, and getting scholarships. The issuance of foundation bonds is expected to reduce interest on student loans an additional one percentage point.

New Ont. regulations will soon cap payday loan charge at $21 per $100 borrowed

New regulations limiting the amount payday lenders can charge on loans will soon come into effect in Ontario.

A new cap of $21 to be charged per $100 borrowed will be in effect starting April 1.

That amount was recommended by an advisory board that consulted the province in drafting its Payday Loans Act.

The rate compares to a $31 charge being proposed in Nova Scotia, $23 in British Columbia and $17 in Manitoba.

Starting in July, the act will also outlaw some industry practices including "rollover" loans, in which borrowers take out a second loan before their first is paid.

The legislation will also give payday borrowers a two-day "cooling off" period to cancel a loan without penalty.

The Canadian Payday Loan Association applauded the new regulations and said they strike a fair balance by protecting consumers without hindering the industry.

But the Ottawa-based Public Interest Advocacy Centre has complained that the $21 charge is "astronomically high" and a "gift to payday lenders."

Canadians borrow an estimated $2 billion a year through payday loans, with Ontario home to more than half of the 1,350 such businesses operating across the country.

Of the 750 payday loan stores in Ontario, almost half are already lending near or below the maximum amount recommended by the board, according to the Ontario government.

New Ont. regulations will soon cap payday loan charge at $21 per $100 borrowed

New regulations limiting the amount payday lenders can charge on loans will soon come into effect in Ontario.

A new cap of $21 to be charged per $100 borrowed will be in effect starting April 1.

That amount was recommended by an advisory board that consulted the province in drafting its Payday Loans Act.

The rate compares to a $31 charge being proposed in Nova Scotia, $23 in British Columbia and $17 in Manitoba.

Starting in July, the act will also outlaw some industry practices including "rollover" loans, in which borrowers take out a second loan before their first is paid.

The legislation will also give payday borrowers a two-day "cooling off" period to cancel a loan without penalty.

The Canadian Payday Loan Association applauded the new regulations and said they strike a fair balance by protecting consumers without hindering the industry.

But the Ottawa-based Public Interest Advocacy Centre has complained that the $21 charge is "astronomically high" and a "gift to payday lenders."

Canadians borrow an estimated $2 billion a year through payday loans, with Ontario home to more than half of the 1,350 such businesses operating across the country.

Of the 750 payday loan stores in Ontario, almost half are already lending near or below the maximum amount recommended by the board, according to the Ontario government.

Bill puts regulatory cop on mortgage-loan-originator beat

The mortgage meltdown has triggered a nationwide regulatory overhaul that has New Mexico scrambling to bring its laws in line with new federal mandates.

Under the Secure and Fair Enforcement for Mortgage Licensing Act, approved by Congress in July 2008, all states must set up new licensing and registration requirements for mortgage loan originators. If states don’t comply with that mandate, known as the SAFE Act, the federal government will do it for them, said New Mexico’s Regulation and Licensing Department Superintendent Kelly O’Donnell.

To comply, state regulators have compiled an omnibus bill that establishes strict regulations for loan originators for the first time, broadens rules governing mortgage loan companies and tightens consumer safeguards in the state’s Home Loan Protection Act.

State Sen. Phil Griego, D-San Jose, introduced the bill (Senate Bill 342), with backing from the attorney general, fair housing advocates and industry associations.

“This bill is the product of long, detailed negotiations,” O’Donnell said. “Everyone agrees that state regulation is far preferable to federal regulation. We don’t want the Housing and Urban Development secretary doing it for us. That basic principle has really pulled everybody together.”

Adam Consiglio, legislative chair and president-elect of the New Mexico Association of Mortgage Brokers, agreed.

“We’re very supportive,” Consiglio said. “Our association has been pushing to license loan originators for years, but past bills have been defeated in part because of opposition by some industry representatives. Now we’re being pushed to do it by the feds, and that’s finally bringing everybody together. We’ve worked hard on this and we want it approved.”

State mortgage loan delinquencies rose to 6.4% in final three months of 2008

The delinquency rate for mortgage loans on residential properties in Wisconsin continues to increase, with subprime and adjustable-rate loans again accounting for most of the troubled mortgages.

But Wisconsin's worsening situation isn't as gloomy as the nation's overall housing picture.

The state delinquency rate was 6.41% during the quarter ending Dec. 31, an increase of 82 basis points from the quarter ending Nov. 30, according to information released Thursday by the Mortgage Bankers Association.

In addition, the rate of Wisconsin loans in foreclosure by the end of the quarter increased 25 basis points, to 2.82%.

Those rates are not seasonally adjusted, and delinquency rates normally show a sharp spike at the end of the year, the association said.

Subprime loans were again the leading culprit in the delinquency and foreclosure rate increases. But a larger number of prime mortgage loans were delinquent or in foreclosure - a sign that layoffs are affecting homeowners' ability to make home loan payments.

The delinquency rate for prime fixed-rate mortgage loans in Wisconsin increased 48 basis points, to 3.39%. For prime adjustable-rate mortgage loans, it increased 130 basis points, to 9.24%.

The delinquency rate for subprime fixed-rate loans increased 305 basis points, to 21.83%. For subprime adjustable-rate loans, it increased 355 basis points, to 26.81%.

The delinquency rates for Federal Housing Administration and Veterans Affairs loans were 13.86% and 8.88%, respectively - up 110 basis points for FHA loans, and up 113 basis points for VA loans.

Cash loans: Easy solution for petty expenses

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Home Loans and Mortgages now available in easy ways

In the response to the increased demand in home loans, mortgages and reverse mortgage Home123.com has announced few financial options for the end users.

There has been an expectation among the bankers that a host of monetary measures put in place by the Reserve Bank of India, in the recent past, and the cut in the prime lending rates by many banks would drive home loan demand, especially in the last one month.

“But the demand has been the same (with no increase) and the growth remains at only normal levels,” a spokesperson of ICICI Bank told Business Line over phone from Mumbai.
Overall mortgage applications last week were 35.6% above their year-ago level.

The indexes likely overstate demand for mortgages because banks have tightened lending standards, which is forcing borrowers to make multiple applications, economists say.
"By lowering interest rates the http://www.home123.com is trying to boost demand for housing, but currently it is not only the level of interest rates that matters but also tight lending standards and limited availability of credit,"

The key issue is not interest rates, but the tightening of lending standards and that is going to be keeping things subdued for quite some time.

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Crime no barrier for loan sellers

Numerous convicts -- including embezzlers, robbers, meth dealers and rapists -- sold mortgage loans to unsuspecting homeowners in Washington in recent years while state lawmakers and members of Congress debated and tabled requirements for licensing and background checks, records show.

Ronald Bernard Cox Sr. was among them. The convicted felon sold mortgages for as many as eight years, freely admitting in an interview that he sold loans even while on work release for felony theft in 2003. The Federal Way man, who says many of his customers were higher-risk, lower-income subprime borrowers, is among a handful of sellers named in an ongoing state investigation of one of the mortgage companies he worked for.

Roswitha Martha McKinney sold mortgages for only two years. But during that time she bilked two mortgage company owners, a co-worker and a close friend out of a total of $78,000 using bogus checks, according to police and court and state records. Although McKinney stole from friends and associates rather than customers, she and other convicted check forgers, as well as identity thieves and extortionists, had ready access to bank statements, accounts and other such information.

Criminals who were barred from the mortgage business in other states continued to sell loans to Washington borrowers. Garrett Sytsma of Kennewick violated numerous licensing rules in Oregon, losing his license there in a 2003 suspension made permanent in 2004, then gave a mortgage broker a bad check for his own home purchase. He pled guilty to a gross misdemeanor in Oregon in 2005.

That crime ultimately led to the loss of Sytsma's license in Washington state, but only because the Washington Legislature finally agreed to require licensing and background checks for mortgage originators in 2007, although employees of federally chartered banks and consumer lending companies weren't included.

The Seattle P-I examined the histories of loan sellers, taking advantage of records made available for the first time because of the new requirement.

A total of 299 loan originators with criminal records applied for licenses in 2007 when licensing and criminal background checks were first required. They applied even though they knew their fingerprints would be checked by law enforcement and that all felonies and gross misdemeanors involving dishonesty within the previous seven years would disqualify them.

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To get eligible with 3 months payday loansprocedure and approval, you need to get qualified with all these terms and conditions:

1. The applicant should most importantly be a permanent citizen of UK and should be an adult with the age of 18 years or more.
2. He should be holding a valid and active checking account which should not be more than three months old.
3. The borrower should be a regular employed in the reputed company.
4. He should work in the same company from the past six months.
5. Candidate should earn the salary of minimum of at least £1000 per month.
6. The borrower should be having a permanent residential address from the past 12 months.

ING lowers interest rates on loans to business

Dutch financial group ING (ING.AS) said on Tuesday it had lowered interest rates on loans to business as it said it expected the European Central Bank (ECB) to lower interest rates on Thursday.

ING said it had reduced the basis rate for business loans by 50 basis points to 5.15 percent from 5.65 percent, which it said would make credit more accessible particularly for small and medium-sized companies.

The financial group said it had seen demand for credit fall dramatically as a result of the economic downturn, as companies postponed investments due to the uncertain outlook.

The European Central Bank is expected to cut interest rates to an all-time low of 1.5 percent on Thursday, and analysts are seeking signals on where its rate floor lies as policymakers seem reluctant to go to zero. [ID:nL2901405]

In January, ING got state guarantees for 22 billion euros ($27.83 billion) of risky U.S. credit assets following a 10 billion euros capital injection from the Dutch state last year.

The company is divesting assets to reduce risks and cope with the credit crisis, while focusing on savings and investment products. ($1=.7906 euros) (Reporting by Catherine Hornby; Editing by Mike Nesbit)

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Unsecured Loans for Unemployed: Best option for people without job

Nobody can live without the basic necessities of life and when you are unemployed, it means you have no income and hence you can’t meet the basic necessities of your life. But practically it is not possible, irrespective of whether you are employed or not, you have to meet certain basic needs. Here comes the role of unsecured loans for unemployed people.

Lender have started new loan scheme called, unsecured loans for unemployed, which is customized to the needs of unemployed people. People without job can borrow unsecured loans for unemployed to pay their pending bills as well as improve their financial status. Unsecured loans for unemployed can also be obtained for consolidation of debts by the unemployed that also helps them to improve their credit score.

The main feature of unsecured loans for unemployed is that it is an unsecured loan. Therefore, the unemployed borrower is not required to offer any of his asset as security against the loan borrower i.e. the unemployed borrower is not required to offer any collateral, which makes this loan most attractive for unemployed people. Even unemployed people with bad credit can also borrow unsecured loans for unemployed.

Actual loan amount in unsecured loans for unemployed varies between £1000 to £15000. Rate of interest of these loans remain less compared to that of other type of loans. Flexible and fixed payment durations are the two payment options for borrowers. This gives great relief to borrowers because in case of any problem in payment they can request lenders to increase payment duration. Borrowers can repay the loan amount in installments and installments are made according to borrower’s monthly payment capacity.

Overall unsecured loans for unemployed are the best resource for unemployed people looking for money to meet their basic needs. Further, flexible and fixed payment options make unsecured loans for unemployed even better suited for unemployed borrowers.

Kerry Frankly is a senior author in loans, where visitors can get useful information and apply for any type of loans online. For further information about Cash loans for unemployed , Debt consolidation, Secured loans visit http://www.loansforunemployed.me.uk

Stimulus package will increase student aid

The country’s economic downturn may have spurred hiring and salary freezes, but student financial aid may avoid budget cuts in upcoming years.

President Barack Obama’s administration plans to make college more affordable and accessible by changing several aspects of financial aid programs by fall 2010, according to a statement released Thursday by U.S. Secretary of Education Arne Duncan. The economic stimulus package will increase tuition tax credits in middle-income households from $1,800 to $2,500, a 39-percent increase totaling $14 billion nationwide.

The Federal Pell Grant Program will also raise their grant ceiling to $5,550, a $500 increase from last year, said Thomas Melecki, director of UT’s Student Financial Services.

The legislation will also give a $200 million funding increase to work-study programs across the country, Melecki said.

“We think [the increase in funding] is a positive move because so many students here at UT-Austin work or want to work part-time while they’re going to school,” Melecki said.

By issuing student loans through direct lending, the federal government will cut out the middleman, saving $4 billion a year, according to Department of Education figures.

In a prepared statement, Duncan said eliminating bank subsidies will provide the department with funds to increase grant amounts.

The Federal Perkins Loan Program will increase the number of participating institutions from 1,800 to 4,400 and provide $6 billion in loans. The loan program currently has $1 billion to lend to students.

Melecki said more students applied for financial aid this year and that the amount they received appears to have increased as well.

“We expect that the number of students who qualify for financial aid, and the amount of aid for which they qualify, will continue to increase in the 2009-2010 academic year,” Melecki said. “That is why we are so pleased that the federal government has increased funding for the Pell Grant and college work-study programs for 2009-2010.”

Taylor Jesmore, a psychology junior and student assistant, has received more financial aid with additional grants. Though she has received fewer scholarships, her aid in loans has remained the same.

“If the amount [of financial aid] increases, it’s going to decrease our need for loans in the long run, especially if it’s Pell Grants we don’t have to pay back,” Jesmore said. “No student wants to graduate with $20,000 worth of student loans simply because they weren’t getting the right amount of financial aid.”

Harvard’s Non-U.S. Students Can Get JPMorgan Loans

Harvard University signed an agreement with JPMorgan Chase & Co. to make it easier for non- U.S. students to get loans, replacing an earlier program canceled by Citigroup Inc.

The arrangement is the first of its kind for JPMorgan, said Thomas Kelly, a spokesman for the bank in New York. JPMorgan is in talks with “fewer than 10 schools” to expand the program, Kelly said.

The global financial crisis prompted Citigroup in October to raise credit standards and cancel programs to provide loans to non-U.S. students at Harvard, the Massachusetts Institute of Technology and the University of Michigan. Most foreign students are ineligible for U.S. government loans, and must show proof of adequate financing before they are granted visas to the U.S.

“We have a significant international student population, and we pride ourselves on the contributions these students make to a diverse campus,” Dan Shore, chief financial officer of Harvard, in Cambridge, Massachusetts, said in an e-mailed statement.

The JPMorgan agreement, reported earlier by the Harvard Crimson student newspaper, contains a provision that would make it possible for non-U.S. students to borrow for educational purposes without a co-signer.

To contact the reporters on this story: Sree Vidya Bhaktavatsalam in Boston at sbhaktavatsa@bloomberg.net; Elizabeth Hester in New York at ehester@bloomberg.net.

Student loan shift worries S.D. lender

South Dakota student loan companies are awaiting more information on a proposal by President Obama that would place all student loans under federal control.

Moving all direct government college loans out of the private sector would eliminate subsidies for banks and save $4 billion a year, the Obama administration said. Last year, Congress made substantial cuts to student lender subsidies but didn't eliminate them.

Full implementation of such a move would put student-loan companies such as the Education Assistance Corp. of Aberdeen out of business as guarantors, according to Clark Wold, president of the EAC.

But the government has said it intends to use private contractors to process student loans even if the loans all come directly from the U.S. Treasury, Wold said.

"So we are cautiously optimistic that the opportunity would still be available for our company to be involved in whatever program emerges," he said.

Great Lakes Higher Education Corp. of Madison, Wis. - the fourth largest of 35 student-loan guarantors in the U.S. - merged with the EAC in February. Great Lakes is well-positioned to get a contract to process direct government loans, Wold said.

Wold said a potential switch would mean schools would have to change the way in which they administer loan programs.

"(The Federal Educational Loan Program) has worked well in South Dakota for 30-plus years," Wold said of the private system. "We believe the same service of lenders and the EAC would be lost to students and parents in South Dakota.

"I think it's extraordinarily important because the student loan process can be, in very many ways, intimidating."

Wells Fargo Bank in Sioux Falls - another private student loan lender - said in a statement that it acknowledges the president's proposed budget and is encouraged by the administration's focus on finding new ways to ensure a high-quality education is available to all.

Student Loans Not Forgiven After All, Teachers Find

Thousands of Kentucky teachers could be on the hook for thousands of dollars in student loans that they were told would be forgiven under a state-based, federally funded loan forgiveness program, reports the Lexington Herald-Leader (“Teachers Say Failing Loan Forgiveness Program Will Cost Them Thousands,” March 2, 2009).

Affected teachers took out student loans for college and graduate school as part of the state’s “Best in Class” program, which offered to forgive the loans of educators who agreed to teach in the state’s hard-to-fill education positions, including math, science, and special education.

Under the program, participating teachers could see up to 20 percent of their student loan payments forgiven for each year they taught in their field — a perk that enticed thousands of teachers to enroll in the program, pursue graduate degrees they might otherwise not have obtained, and in some cases, leave lucrative careers in favor of teaching, the Herald-Leader reports.

But now that the loan forgiveness program has run out of funding — due in part to Congress cutting the program’s subsidies from $16 million to $7 million over the last year — these teachers are scrambling to make their student loan payments, which range from $200 to $400 a month for individuals, to more than $800 for couples.

“The loan forgiveness played a large role in me deciding to go into this field,” said Travis Gay, a special education teacher. “I paid for my entire master’s degree out of the program, books and all, and so did my wife.”

“We were told, ‘It’s something you can count on.’ But then it was just gone,” said Gay. He and his wife owe a total of $90,000 in student loans.

To find debt relief from these loans, Gay and other affected teachers have formed a coalition and are turning to the state for help. The coalition is asking Gov. Steve Beshear to allocate a portion of the state’s $3 billion in economic stimulus funds to the failing loan forgiveness program.

State legislators are also considering a proposal to essentially shift funding from another teacher scholarship program, the Kentucky Teacher Scholarship Program, to the Best in Class program.

Lawmakers: Compromise on payday lending regulation

After more than a dozen bills aimed at regulating payday lending prompted opposition from the cash-checking industry and strong lobbying from consumer advocate, lawmakers say a possible compromise has emerged.

The compromise would give more protection and choices to customers while avoiding a crippling effect on the payday loan industry, lawmakers said.

"If we can hold this together, and keep everybody on board, everyone's going to be happy," said state Rep. Steve Kirby, D-Tacoma, who chairs the House Financial Institutions and Insurance Committee.

Payday lending has been a contentious issue in Olympia for years, but this session brought an especially high 15 bills on the topic. Many of the elements of those proposals have been absorbed into two bills - one each in the Senate and House - while measures that would have eradicated the payday industry, died in committee.

"There was more enthusiasm about introducing bills this year; legislators felt there was more of a likelihood of getting something through," said state Sen. Jeanne Kohl-Welles, D-Seattle, chairwoman of the Senate's Labor, Commerce and Consumer Protection committee.

The compromise bills would limit the size of a payday loan to 30 percent of a person's monthly income or $700, whichever is less. They would also bar people from having multiple loans at different payday companies, and set up a database to track the number of loans taken out by people.

The bill also enacts an installment plan for people who fall behind on their loan payments that would allow customers to have up 90 days to pay back a loan of $400 or less, and 180 days for a loan of more than $400 without a fee. Currently, a borrower has 60 days and must pay fees.

The bills are getting lukewarm responses from both sides of the issue.

"It's the most activity we've seen in this state, but I wouldn't call it progress, not yet anyways," said Maya Baxter, director of the Statewide Poverty Action Network.

Baxter and other advocates are lobbying to extend loan terms to repay the initial loan. Under the proposed bill, a person initially has until the next paycheck to pay back a loan. Some advocates would like to see that increased to 30 or 60 days.

Critics say payday lending is a debt trap that leaves people paying off loans for a long time, often using other payday loans, and paying heavy interest. The measures do not include an interest rate cap - an element consumer advocates have sought for years.

"I'm not really sure how it's going to affect us," said Dennis Bassford, chief executive officer of Tukwila, Wash.-based MoneyTree Inc. "There's a recognition that (payday lending) is a viable product that should be in the market place."

The industry contends its services provide a temporary financial bridge to customers in need, and warns that heavy regulation would put payday lenders out of business, throwing thousands of workers out of jobs.

Bassford said he doubts the industry will lobby for further changes, while Baxter said consumer advocates will continue to extend the loan terms.

"Lawmakers have been supporting steps that move to real consumer protection but neither of the bills address the root cause of the problem, which is the original loan," Baxter said. "It only takes one loan to put someone into this downward spiral of debt. The original debt is what traps you."

Kohl-Welles said she would have preferred that legislation go further in protecting customers, but she said a compromise had to be reached.

On Wednesday, House Speaker Frank Chopp, D-Seattle, said he supports the compromise.

"It's been a real challenge these last couple of years," Chopp said, calling it "good progress to get something that's workable and really provides a lot more consumer protection."

Lawmakers in 26 states have introduced more than 80 bills related to payday lending, according to the National Conference of State Legislatures.

The proposed bills here do not go as far as other initiates have gone in other states.

In Ohio and Arizona, voter-approved initiatives passed in 2008 reined in payday lending. Ohio voters approved a law that cut the annual percentage rate that payday lenders can charge from an average 391 percent annual rate to 28 percent, and limits the number of loans customers can take to four per year. Arizona voters rejected a ballot initiative paid for and written by the loan companies to allow them to continue charging high interest rates on small loans.

In Washington, the bills await floor votes in their respective chambers, something Kirby and Kohl-Welles are confident will happen before a March 12 deadline.

Bills to limit payday loan interest rates likely dead

HELENA - Two lawmakers failed Tuesday to blast bills stuck in committees onto the Senate and House floors for debates on their bills limiting the interest rates charged by payday lending businesses.

It likely dooms efforts to crack down on payday lending businesses for two years.Sen. Kim Gillan, D-Billings, was unsuccessful at getting her Senate Bill 397 from committee to the Senate floor for debate. Her effort failed 25-25, falling one vote short of what she needed to get the bill on the floor.
In the House, Rep. Bill Wilson, D-Great Falls, was shot down on his motion to bring out his House Bill 396 for debate. His attempt drew 51 votes for it and 49 against it, missing by nine votes.

House rules require 60 votes out of the 100 members to blast a bill from committee, while Senate rules require 26 votes in the 50-member Senate.

Their bills are likely dead because Thursday is the 45th day, the halfway point in the Legislature. Any bill that hasn’t been approved by one chamber and sent to the other by Thursday is automatically dead, except for budget and tax measures.

Both Gillan and Wilson’s bills sought to cap these lending businesses’ interest at an annual percentage rate of 36 percent as 15 states have done.

Gillan said these lenders charge the equivalent of 600 percent interest on two week loans, “which robs the economy of Montana by $50 million every year.”

Sen. Joe Balyeat, R-Bozeman, opposed the motion, saying these lenders can loan only $50 to $300 per loan, a fee limited by law. The state Revenue Department charges even higher interest rates on late taxes, he said.

Under state law, the borrower’s fee is limited to 25 percent of the face value of the loan, which is limited to a maximum of 31 days.

In the House, Wilson said more than half of these loans end up in default. He said 60 percent of the payday borrowers take out a dozen or more loans from these businesses annually.

“The people are paying interest rates that in my opinion would make Tony Soprano embarrassed,” he said.

But Rep. Mike Milburn, R-Cascade, said passage of the bill would put 750 people who work for payday loan agencies out of work. Business owners said they couldn’t afford to operate if restricted to 36 percent annual percentage rate interest.

“The problem we’re dealing with is this is the only opportunity most people have to borrow some money,” said Rep. Ed Butcher, R-Winifred, adding later: “What do you want them to do? Go out and sell their bodies on the street?”

Wilson said he wasn’t trying to put the payday firms out of business. He said he offered to reduce the borrower’s fee to 10 percent, down from 25 percent, but the industry didn’t support it.

Payday loan firm settles lawsuit

Payday loan provider Cash Store Financial Services Inc. announced late yesterday it will set up a fund to settle a class-action lawsuit filed in Ontario regarding the fees and interest it charged customers.

The Edmonton-based company said the fund will include $1.5 million in cash and $1.5 million in credit vouchers.

"The settlement fund will be used to make payments to all customers of The Cash Store and Instaloans, outside of Alberta and British Columbia, who obtained and repaid a payday loan in full," the company said in a news release.

The vouchers can be used to pay new or existing brokerage fees on payday loans from Cash Store or Instaloan offices, the company said.

The vouchers have no expiry date and are transferable.
© Copyright (c) The Victoria Times Colonist

CLOUT seeks to cap payday loans

An effort to cap interest rates on payday loans in Kentucky may not happen this year, but a coalition of Louisville churches is still taking up the cause. Citizens of Louisville Organized and United Together, or CLOUT, is making payday loans the focus of its annual campaign, starting with a March 23 community gathering at Memorial Auditorium at 970 S. 4th St.

CLOUT hopes to persuade lawmakers to put a cap of 36 percent on the annualized interest rate that payday lenders can charge borrowers. In previous years, the group has focused on other issues such as illegal drugs, affordable housing and elementary school reading programs.

The Rev. Keith Switzer, of Mosaic United Methodist Church in the Pleasure Ridge Park area, said CLOUT's members realize the chances are slim for any legislative changes to take place this year regarding interest rates. But he said the group's 15 member churches will work on the issue through 2009, and into 2010 if necessary. CLOUT also is taking steps to encourage the estimated 29,000 people in the metro area who don't use banks to form relationships with a traditional bank or credit union.

Payday lenders such as Check 'n Go, which has 39 locations in Kentucky, charge a fee of $15 for every $100 borrowed, which translates into an annual rate of 391 percent. But Jeff Kursman, a spokesman for Check 'n Go in Cincinnati, said that figure is misleading because the loans are only outstanding for two weeks.

Instead of worrying about interest rates, Kursman said advocacy groups would be better off promoting consumer education, and making sure borrowers understand the terms of their loans -- including high-cost products offered by traditional banks.
(2 of 2)

One such product, a cash-advance loan called Early Access, was launched in the Louisville area by Fifth Third Bank last September. Early Access carries a 120 percent annualized interest rate, but Fifth Third spokeswoman Gail Lyttle said it is "not nearly as expensive" as a payday loan and is designed only for existing customers in need of emergency money.
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Several attempts have been made in recent years to impose tighter restrictions on interest rates for Kentucky's payday lending industry, but most have not been successful. One current piece of legislation, House Bill 444, would create a computer database to monitor high-cost loans and make sure that borrowers don't have more than two such loans at a time.

A House committee approved the bill earlier this week with no interest rate changes, but an amendment was filed Thursday by State Rep. Jim Glenn, D-Owensboro, creating a 36 percent cap -- the same limit sought by CLOUT. Kursman said such a limit would amount to "prohibition" for the industry, and wouldn't allow Check 'n Go to even cover the cost of utilities in its stores. For every $15 charged on a loan, he said $13 is spent on overhead, loan defaults and other items.

Glenn, who described the industry as "almost a form of financial slavery," said yesterday that he expects the bill to receive a full vote next week. It also would need to be approved by the Senate.

Organizers at CLOUT hope to draw more than 1,500 to the March 23 assembly to launch the effort they are calling Fair Finances for All Families. Switzer said the churches -- mostly Baptist, Catholic and Methodist -- hope to encourage local elected leaders to push banks to be more accessible to low-income customers, and offer more alternative products to payday loans. CLOUT also is working with groups such as AARP and Kentucky Youth Advocates to advance the cause.

Reporter Alex Davis can be reached at (502) 582-4644.

Payday Loan Can Put Monkey on Back

Just a few years ago it was folks who lived paycheck to paycheck who were more likely to take out a payday loan. Not so anymore. With the down economy, many people are scrambling to get cash from anywhere they can -- including payday loans.

Payday loans aren't always the quick fix that borrowers hope. Sometimes they lead to increased debt.

Here's how a payday loan works:

You apply for a loan, say for $250. You'll be charged a fee, possibly $50, which comes off the top. You write a postdated check for the full $300 (the check is your collateral) and receive $250 in cash. At the end of the period, perhaps two weeks, the lender deposits the check -- or you go in and pay the $300 in cash.

If you don't have the money, the lender will be happy to roll it over into another loan, which will include more fees. If another $50 fee is tacked on, you'll then owe $350 on a $250 loan. If you don't pay, they'll cash that check, leaving you with even more problems, this time with the authorities for writing a "bad" check.

If the lender takes you to court to seek repayment for the bad check, some states allow a "three times the amount" penalty to the payee.

You'll pay that, plus non-sufficient funds charges at the bank.
Online, the situation can be even more serious, and the opportunity for scams is rampant. For a lender to electronically deposit the money, it needs your bank account number, as well as personal information that likely includes your Social Security number. You may be required to pay an upfront fee for the loan, thereby giving the lender permission to do an electronic funds transfer out of your account. When it comes to the loan itself, the question to ask yourself is: Will it be putting money in -- or taking more money out?

A number of states have legislation in the works to cap the annual interest rate, generally at 36 percent. Some states have already done this.

If you need cash, do anything you can to get it elsewhere. If you're caught up in a loop of ever-increasing payday loans, seek counsel at your local Legal Aid.David Uffington regrets that he cannot personally answer reader questions, but will incorporate them into his column whenever possible. Write to him in care of King Features Weekly Service, P.O. Box 536475, Orlando, FL 32853-6475, or send e-mail toDavid at the following : columnreply@gmail.com.

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Payday loans aid struggling people

According to certain editorial writers and politicians, I'm a predatory lender. Like a vulture, I swoop down on weakened victims and pick their pockets clean. I'm a bad dude, if my critics are right.

But they're dead wrong. I have worked for Advance America in Spartanburg for 11 years and made hundreds of small loans to people who needed the money for emergencies or other circumstances.

I am proud of my company and go to work everyday with confidence that I am making a positive contribution to my community. You've heard about the small minority of customers who borrow more than they can afford. When I find that's the case, I put them on an extended payment plan to help them out. Most use the service responsibly; it's the few who borrow more than they should that you read about.

You don't read about the single mom who came into my store crying. She has three children, one of whom has multiple sclerosis. She had to spend most of her paycheck on medicine for her child and literally did not have the money to feed her children.

She left my office with a $300 loan that allowed her to provide her family the basics until she got paid. She repaid it in two weeks.

A man visited my office recently and told me he and his wife moved to Spartanburg from Tennessee. Both got good jobs, but his wife was let go because her company downsized. They needed help to pay their bills, and I gave them a loan, which was repaid. The wife found a new job.

A woman came to the office. Her husband died the day before and she did not have the money to bury him. She sobbed as she described the helpless feeling of losing her mate unexpectedly and the indignity of her situation. She got her loan. Her husband got a proper burial.

A few days before Christmas, a single mother sat across my desk panic-stricken. She was due in traffic court the next day for a $300 violation and feared she would wind up in jail unless it was paid, leaving her son home alone over Christmas. She got the loan and her son had his mother during Christmas.

These stories are not unusual. In fact, many of my customers come to me as a last resort because life has hit them in the face and there's nowhere else to turn. They've tried the banks and credit unions and have been told no. Many have maxed out their credit cards. If I don't help them, no one will.

Sitting on the sidelines listening to the critics, it strikes me that they are gainfully employed, many by groups that exist to stir controversy. They have not walked a mile in the shoes of my customers yet claim to speak for them even though they do not know them.

Less than 5 percent of Advance America's customers do not repay their loans. Their median household income is more than $42,000 a year, and nearly half own their own homes. To get a loan, they must present proof of income and have an active checking account.

What about hiding the fees, as the critics claim? In every Advance America office there is a 24-by-36 poster on the wall that clearly states our fee is $15 for every $100 loan. Moreover, we are required to review the contract with the customer before the consumer signs it. It is our obligation to make sure every requirement is clearly understood and it is the customers' obligation to understand it before they sign it.

Both North Carolina and Georgia banned payday loans, with bad consequences. A staff study by the Federal Reserve Bank of New York concluded the absence of payday loans in those states left consumers without a responsible credit option and forced them to seek alternatives that can lead to long-term financial problems.

Perhaps in response to these facts, few critics admit to wanting a ban in South Carolina. But they would block the loans in such a way that would prohibit me from making loans to those who need it most.

I'm just one of 3,000 people who work in this state's payday industry. Critics don't appreciate me, but that is more than offset by the satisfaction I get from helping people. It's the appreciation from customers that matters.

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House panel rejects bill on loan interest

Less than four months after voters overwhelmingly rejected a measure that would allow lenders to charge triple-digit interest rates for short-term loans, a House panel did the same thing.

In a surprise move Monday, Republican Rep. Doug Quelland joined the Democratic minority to kill House Bill 2608. It would have created new lending regulations in Arizona to allow financial services companies to loan up to $3,000 with annual interest rates of up to 113 percent.

The final vote was 4-4, effectively rejecting the plan before the House Committee on Banking and Insurance because it lacked a majority vote.

Quelland gave no reason for his vote and immediately left the hearing room and could not be reached for comment.

"This is the way it was supposed to be," said Lupe Solis, an advocate with AARP Arizona, which opposed the bill. "Arizona consumers should be protected, and Arizonans said so in November."

In the fall, voters by a 60 percent margin rejected a proposal that would have required payday lenders to lower the maximum annual interest rate to 391 percent from 460 percent. That measure also would have indefinitely extended their state licensing, which expires July 1, 2010.

Currently payday loan shops, which have boomed in Arizona, can loan up to $500 instantly to someone with a steady job and checking account.

The payday loan industry, through a spokesman, said it had no comment and did not take a position on the legislation. The group is waiting to see what banking reforms will come out of Congress.

Arizona law requires all lenders, except payday loan shops, to charge no more than 36 percent annually in interest for a loan.

The rejection of HB 2608 marks the fourth straight year that a similar bill failed to pass muster with legislators.

"For now, it's dead," said Rep. Andy Biggs, R-Gilbert, the bill's sponsor.

Biggs said he was surprised with the outcome, and he had told the eight committee members the legislation was needed because borrowers seeking unsecured loans typically can't get a loan from a traditional bank or credit union. He also said the national financial meltdown has made obtaining a loan even more difficult.

"What you have to realize is there are people who need these loans. Where will they turn?" Biggs said.

Biggs also said there would be a need for this type of business should payday lenders go out of business next year.

Opponents of the bill said it was just another version of the ballot measure that voters rejected last fall.

"This is a new version of predatory lending," Kathy Jorgensen, an advocate with Society of St. Vincent de Paul, told the committee.

Biggs said the legislation differed from payday lenders because the interest rate was lower and the loan limits were higher. He said lenders who would provide these loans currently do not operate in Arizona, but they have stores in at least seven other states.

He said the interest rates range would have ranged from about 51 percent to 113 percent, depending on how much is borrowed and the length of the loan.

The legislation would have allowed loans of $200 to $3,000, and they would have to be repaid in five to 24 months. Interest-only payments were prohibited and borrowers could repay loans early with no penalty.

Payday loan rules an important step, but education is needed

With the new payday loan rules announced Monday, the provincial government has taken an important step towards reining in an industry that for too long has been out of control.

For the first time, lenders will have to be licensed, undergo a criminal record check and post their charges and fees prominently in their offices. And they won't be allowed to garnishee wages or make more than one loan at a time to a customer.

Even so, the new limit that payday lenders are allowed to charge for short-term loans amply illustrates why British Columbians should use these services only as a last resort.

On the kind of short-term loan payday lenders typically make, they cannot charge more than 23 per cent of the principal for a two-week loan. That rate translates into total charges of 600 per cent on an annual basis.

B.C.'s new regulations were made possible after the federal government gave provinces the authority to regulate the payday loan industry, which had to that point been largely unfettered since prosecutors seemed unable or unwilling to use the Criminal Code provisions to crack down on interest rates that clearly exceeded the mandated limit of 60 per cent per year.

With 23 per cent for a short-term loan, B.C. has landed in the middle of caps being set by other provinces. Nova Scotia allows 31 per cent and Manitoba just 17 per cent. The new rate should be reviewed as mandated in a couple of years.

While such high rates are defended on the basis that short-term loans to relatively high-risk customers are expensive to provide, most people who have other options will look elsewhere.

Even relatively high-cost credit card debt is a fraction of the cost of a payday loan, and conventional short-term bank loans, such as through a revolving line of credit or even overdraft protection on a current account, are far less expensive.

But as credit counsellors can attest, people don't always make the best choices with their money. Sometimes they simply don't know any better. A survey of payday loan customers in Manitoba found that a third believed they were paying less than they would have if they had used their credit cards.

So new rules that require payday lenders to clearly tell their customers how much their loan will cost should be a benefit.

In addition, however, the province should look at whether we are doing enough in the K-12 school system to foster financial literacy.

It's not enough just to give children the skills they need to earn a living. They also have to learn how to get value out of the money they earn.

But many people are willingly paying the high cost of payday loans because they perceive, rightly or not, that they don't have access to traditional banking services.

The banking crisis, which is causing lenders to look even harder at potential clients, won't help.

But even in the current harsh climate, banks and other financial institutions should be encouraged to look at why people -- most of whom also have accounts in banks -- are taking their business to payday lenders despite the higher rates they charge.