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Payday loans have historically been provided to help consumers out of tough financial situations. Payday loans are ideal in some situations where a consumer needs cash quickly for a car repair, a medical issue, or any other unexpected expenses. While payday loans come with low qualifications and can be processed and approved quickly, the extremely high costs have gotten consumers caught into a debt cycle that is impossible to get out of.

In recent years, a new alternative financing provider, Fig Loans, has entered the marketplace and has tried to provide the same service to fill a need that payday lenders have historically provided. However, Fig Loans is also focusing on making the loans more affordable and finding ways to help consumers avoid the circle of debt that payday loans have historically caused. There are several differences that have set Fig Loans apart from traditional payday lenders.

Flexible Repayment Terms

One way that Fig Loans is different from payday lenders is that they provide more flexible repayment terms. Payday lenders typically have aggressive and quick repayment terms, which are usually around two weeks. Unfortunately, this is often way too quick for a borrower to repay the loan and they are then required to take out a new loan. Fig Loans will give the borrower the option of choosing their repayment term, which can last from just a few weeks to several months. This should allow a borrower to better plan and avoid having to take out multiple loans.

Underwriting Tests

Another way that Fig Loans separates themselves from payday lenders is that they have underwritings tests that help to determine approval. Most payday lenders have no underwriting requirements and base approval solely on the borrower’s ability to provide proof of employment. Fig Loans has several different underwriting guidelines that help to verify that the loan is affordable and that the borrower has the credit experience and quality needed to repay the debt.

Lower Costs

Fig Loans also offers lower cost options to consumers compared to payday lenders. While most payday lenders have APRs that are in excess of 400%, Fig Loans starts their loans out at 140% APR. While this is still extremely high compared to bank loans and other financing options, it is still a significant cost reduction compared to payday lenders. Further, if a borrower refinances their loans and shows the ability to repay their debt, the interest rates can be reduces all the way down to 36%.

Credit Counseling

One of the most important services that Fig Loans provides is credit counseling. Fig Loans makes the effort to ensure that their customers are able to achieve financial freedom. Fig Loans has a credit-counseling department that focuses on financial education and helping consumer develop a personal financial plan to eventually repay the loan and live debt-free.

In general, Fig Loans is a significant improvement compared to payday loans. The company has the ability to provide loans quickly and is able to do so at a much lower cost. While the cost is considerably lower, financial experts are quick to warn that the 140% rate is still extremely high and the loan should be taken out with caution.