Loan program and process for transacting the same
View Patent ↗A loan program and process is structured to provide a significant end-to-end cost savings while overcoming many, if not all, of the drawbacks and regulatory obstacles present in the current payday loan industry. The program, the end-to-end process, and the arrangement thereof, permits a lender to offer short-term, small cash loans to employees through an employer controlled payroll system. Access to the employer controlled payroll system is achieved through an agreed upon relationship between a coordinator, a lender, and the employer. As part of the agreed upon relationship, the lender guarantees that all fees, interest, and other ancillary costs over and above a principle amount of the short-term, small cash loan will be kept at or below a predetermined annual percentage rate (APR). In addition, the loan is repayable over a number of payroll cycles such that each successive payday the principle balance of the loan decreases.
1. A method of coordinating a loan program, comprising:
executing a contract between a lending entity and an employer to provide a loan program for on-demand, small loans that is offer-able as a benefit through the employer to employees of the employer, the contract having an annual percentage rate set by the employer, and wherein the annual percentage rate includes fees, interest, and other ancillary costs, which taken in total provides an overall interest rate that is less than or equal to the annual percentage rate; and
deducting loan payments directly from paychecks of the employees and transmitting the loan payments to a lending entity to reduce the representative outstanding loan balances of the employees with outstanding loans over a plurality of pay periods.
2. The method of claim 1 , wherein executing a contract between a first entity and an employer includes executing a contract between a coordinator and the employer.
3. The method of claim 1 , wherein having at least the agreed upon annual percentage rate includes an annual percentage rate in a range of about 0%-36%.
4. A loan program comprising:
a loan processor;
a loan request system in communication with the loan processor and operable for an employee of an employer to request a loan;
an authentication system in communication with the loan processor to authenticate at least several underwriting aspects related to the requested loan;
a loan amount determination system in communication with the loan processor to determine a total amount of the loan, wherein the total amount of the loan includes a non-principle portion and a principle portion, wherein the non-principle portion is substantially equal to an interest rate that is not greater than a threshold annual percentage rate set by the employer;
a loan payment determination system in communication with the loan processor to determine a loan payment to be deducted over a plurality of paydays until the loan is paid-in-full;
a loan proceed distribution system in communication with the loan processor to provide a distribution of an amount of loan proceeds equivalent to the principle portion of the loan to the employee via a money transfer arrangement; and
a loan payment deduction system in communication with the loan processor for providing paycheck deduction instructions with respect to the employee to a payroll department controlled by the employer, wherein the paycheck deduction instructions include transferring an amount of money that is at least as much as the loan payment to a preferred lender.
5. The loan program of claim 4 , wherein the loan request system includes an interactive website portal accessible by the employee through a secure intranet of the employer.
6. The loan program of claim 4 , further comprising a secure database in communication with the loan processor and having employee information.
7. The loan program of claim 4 , wherein the threshold annual percentage rate is a not-to-exceed annual percentage rate in a range of about 0-36% and established by the employer.
8. A method for providing loans comprising:
establishing a short term loan program for employees of an employer;
receiving a loan request from the employee before a regularly scheduled payday for the employee;
determining a loan amount available to the employee based on a threshold annual percentage rate set by the employer; and
providing the loan to the employee under a set of loan terms, wherein at least one loan term obligates the employee to a repayment plan for the loan over a plurality of payroll cycles.
9. The method of claim 8 , wherein determining the loan amount available to the employee based on the threshold annual percentage rate includes combining all fees and interest associated with the loan to achieve the threshold annual percentage rate.
10. The method of claim 8 , wherein determining the loan amount available to the employee includes the threshold annual percentage rate set by the employer to be in a range of about 0 to 36%.