Mobiloans’ promise of fast cash may sound enticing, but don’t be fooled! It can be far more expensive than typical payday loans, which are themselves not exactly the cheapest bad credit option around. They promise to be better than overdrafting on your checking account, but in reality, they’re one of the worst options out there.
“Easy to understand pricing?” Not quite
Mobiloans presents itself as the alternative to overdrafts during a cash emergency. You open an account with Mobiloans and link it to your bank account. When you open the account, you’re given a credit line from $20 to $1,500. If you find yourself short of cash, you can go onto their website and get money deposited directly into your checking account. You then pay back Mobiloans, and avoid overdrafting on your checking account.
And even better: according to Mobiloans’ terms and conditions:
The interest rate applied to the unpaid principal balance…is 0%.
Fantastic, right? You can avoid overdraft fees and you don’t have to pay interest. Not so fast: if you’re strapped for cash, Mobiloans can bleed you dry.
Start bad, end worse
To start off, you have to pay an upfront finance charge of whatever amount you take out:
- 15% cash advance fee if you withdraw $500 or less
- 10% cash advance fee if you withdraw more than $500
To put that into perspective, credit cards don’t charge more than 5% for cash advances. But that’s just to start with. If you can’t pay back your loan, you get into even deeper trouble. Twice a month, you have to pay a “fixed finance charge” depending on the unpaid balance.
|Outstanding balance||You pay|
The billing cycles come either every other week or twice a month. At the end of each billing period, you’re responsible for making the minimum payment – $20 or 5% of your outstanding balance, whichever is higher. But look at the fee schedule. If your outstanding balance is $101, you get slapped with a $25 finance charge. If you make just the minimum payment, you’ll owe $106 – more than you did in the last period.
The scary math
If you need emergency cash right now, what’s the chance that you’ll be able to pay it off – and meet all your other expenses – in two weeks? Most people think payday loans are a one-time deal, but only 1% of payday loans are paid off in full at the end of the billing cycle. Instead, the average borrower needs to renew the loan 8 times before he can pay it off, and can only afford to pay $50 every two weeks.
If you can only afford to pay $50 every two weeks, how much would this “affordable” loan cost you?
|Loan Amount||Upfront Fee||Total Finance Charges Paid||Weeks Till Paid Off||APR|
|$500||$75||You’d never be able to pay off the loan with $50 per billing cycle|
If you take out a loan of $500 or more, you will never pay it off if you pay $50 per period. And let’s not even talk about what happens if you make only the minimum finance charge – if your account balance is more than $200, you’ll never pay off your debt at that rate.
That’s hardly “a better alternative” to overdrafts or payday loans. In fact, the APR is actually higher than the average payday loan.
Mobiloans won’t stop you from overdrafting on your account
Even if you have Mobiloans, you can still overdraw on your account. In fact, they can actually cause you to overdraw. If you sign up for AutoPay, they’ll automatically deduct the minimum payment from your checking account. If you don’t have enough money in the account, you’ll overdraw, incurring a fee of up to $34 in addition to what Mobiloans is charging you. In the US, 65% of payday loan borrowers end up overdrafting their checking account when they try to pay back the loan.
Mobiloans does allow you to avoid AutoPay, which means you’re safe from overdrafting. But there’s a catch. If you don’t use AutoPay, you will only be able to receive your Mobiloans funds by mail. So if you request money from them, they actually send you a physical check, and you have to pay off the loan in the same way – by snail mail. So much for fast cash.
Better alternatives to Mobiloans
Just because you need money quickly and have less than perfect credit, you don’t have to be stuck paying 300% interest or more.
- Credit union payday loans (called short-term loans) offer fast cash for just 28% APR
- LendUp offers rates around 15%, but first-time borrowers need to pay off the loan entirely in the first 30 days
When it comes to payday lending, be careful! It pays to shop around and avoid sketchy lenders who’ll try to lock you into a cycle of debt. Check out our guide to cheap unsecured loans to see what you should watch out for and where you can find an affordable loan.