The perils of online only Lending

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My cousin Johnny had gone through a divorce and was in a financial hole with his own medical issues plus pending child support payments.

His credit score was in the toilet due to missed mortgage and car payments and foreclosure on his home was looming when he became aware of the online lender Avant. He sent us the unsolicited email ad you see below from Avant with the marketing slogan “You deserve a better loan”. ¬†Avant will lend you from $1000 to 35K, completely online with no paper trail to prosecute them in case they rip you off with an unfairly high interest rate. You will get your money the next day and they promise no hidden fees.

Now back to my cousin. His credit score was below 600 and he could not qualify for any credit cards, BUT Avant essentially  instantly approved a $10,000 loan online after around a 30 minute loan application process. Johnny should have smelled a rat here, but he was depressed because his wife had left him which clouded his judgement. You know how it is when you are down in the dumps and always looking for a ray of sunshine or glimmer of hope. Johnny thought his prayers had been answered and the $10,000 loan was a gift from God that would let him stay in his house.

He used some of the loan to catch up on his mortgage payments and to keep his car from getting repossessed by Toyota Financial Services. His first monthly payment on the loan was $412 which, of course, came out of the 10K he had borrowed. He found out that if he continued to make those monthly payments until loan was paid off, he would pay over $12,000 in interest or more than double the money he had borrowed!

None of this had been disclosed to him during his online application. The unsecured loan came with a 26.99% APR interest rate due to cousin’s lack of creditworthiness. Avant was not upfront about the high interest rate and Johnny could never get through to any telephone customer support who could place him in contact with loan officer. This was probably why no origination fee was charged since Avant appears to have minimal staff due to the 100% online nature of their loan application process.

You might wonder how he determined the interest rate was 26.99%. He gave his payment plan to family friend who worked for a bank. The friend worked backwards from the amount of the monthly payment and total months required to payoff the loan to calculate the unspecified or undisclosed interest rate by the loan shark!

Last I heard, Johnny was considering declaring bankruptcy as he was still only paying off mostly interest on his “life-support” loan AFTER his certified snail mail correspondence to the address: Avant, 640 N. LaSalle Drive, Suite 535, Chicago Illinois, 60654 was lost in the shuffle.

To be fair to Avant, they rank high on the Forbes list of online lenders. Also Credit Karma lists multiple favorable reviews for a lender whose niche is lending to down on their luck borrowers who have already struck out many times financially.

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