Flex Loans: A Tennessee & Arizona Lending Option

Flex loans offer borrowers in Tennessee and Arizona a new funding option that combines the best elements of title loans, payday loans and credit cards.

In the past, borrowers unable to qualify for credit cards due to poor credit or lack of verifiable income have turned to title loans and payday loans when facing short-term financial challenges. Unfortunately, such lending products are often rigid and inflexible, featuring small loan limits and extremely short repayment terms. With the arrival of flex loans, borrowers in Tennessee and Arizona gain a measure of control over how much money they borrow and when they pay it back.

How Flex Loans Work

A flex loan is a line of credit up to $2,500 that is open-ended and renewable. Similar to a credit card, a flex loan allows the borrower to withdraw funds so often as needed, provided that the borrower does not borrow more than his or her credit limit.

The approval process is much easier for a flex loan than for a credit card or bank loan. Many lenders now offering flex loans do not conduct credit checks or maintain minimum FICO score requirements. A borrower only needs a few basic things for approval:

• A valid Social Security number or taxpayer ID number.
• A government-issued photo ID.
• Proof of income and residence.

As such, a flex loan features some of the most attractive elements found with title loans and payday loans. Even borrowers with bad or limited credit qualify, and they do not have to wait days to a week or longer to receive their cards in the mail. However, they still enjoy the flexibility of knowing their credit line is available when they need it.

Once a flex loan borrower taps into his or her credit line, interest charges are based on the loan balance as well as how long that balance is outstanding. While most flex lenders calculate interest monthly, borrowers can determine their annual rate simply by multiplying the monthly interest by 12.

Like a credit card, a flex loan offers a minimum payment option, though this amount usually is sufficient only to pay off the interest due, or borrowers may repay their full balance at any time. There is never a prepayment penalty for paying a flex loan balance off early.

How to Apply for a Flex Loan

Borrowers seeking flex loans can apply either through a brick-and-mortar lender or online. Both options have advantages and disadvantages. Applying in person offers several benefits:

• Borrowers can sit down face to face with the loan representative.
• Some consumers feel more comfortable doing business with someone local.
• In case an unexpected event arises, borrowers have someone they can talk to in person.

However, this method of applying for a flex loan also has some drawbacks:

• Traveling to a brick-and-mortar lender can be time-consuming.
• Borrowers in small towns or rural areas may find they have limited options.
• Those concerned with privacy may feel uncomfortable divulging their financial situations to someone local.

Online flex lenders have proliferated recently, and many borrowers choose to use them for several reasons:

• Borrowers can apply without leaving the house, often in a few minutes or less.
• Borrowers are not restricted to their local area when choosing a lender.
• It can be easier online to obtain several offers and compare them side by side.

Before choosing this route, however, borrowers should be aware of a few pitfalls with seeking a loan online:

• Some online lending websites are scams designed to extract sensitive personal and financial information.
• A live person can be harder to reach if a situation requiring customer service arises.

Whether a borrower chooses brick and mortar or online, there are a few standard things he or she typically needs to get approved for a flex loan. The first of these items is a driver’s license or government-issued ID card. The borrower should have this on his or her person when applying at a brick-and-mortar lender. Many online lenders allow borrowers to scan their IDs and other required documents using a smartphone.

Because a flex loan technically falls under the umbrella of payday lending, a job or verifiable source of income usually is needed for approval. A recent pay stub or certified tax return typically suffices as proof of income.

Lastly, a flex loan borrower must prove his or her place of residence. A recent utility bill, cable bill, mortgage statement or lease agreement works for this purpose.

Tennessee Flex Loan Laws

Flex loan lenders in Tennessee have a unified set of regulatory guidelines under which they must operate. Businesses offering these loans must register and get approval from the state. Additional restrictions on flex lenders in Tennessee include the following:

• The maximum credit line allowed is $2,500.
• Interest rates are capped at 24%.
• In some cases, however, lenders may charge specific daily fees on top of interest charges.

Arizona Flex Loan Laws

Flex loan laws in Arizona are similar to those in Tennessee. Government regulations limit the loan amount, loan term and interest rate.

• Loan amount maximum of $2,500.
• Loan term limit of 24 months.
• Maximum monthly interest rate of 17%.

Flex Loan vs. Registration Loan

Apart from flex loans, another variation of payday loans exists as an option for borrowers in Tennessee and Arizona. Registration loans are short-term lending products for which borrowers must provide valid proof of vehicle registration to receive funding.

Despite the involvement of the borrower’s vehicle, a registration loan is more similar to a payday loan than to a title loan. With the latter, the borrower pledges the title to his vehicle as collateral. This action gives the lender the ability to take possession of the borrower’s car in the event of nonpayment.

The borrower’s vehicle does not serve as collateral for a registration loan, and the lender may not repossess it as recourse for default. In certain situations, however, the lender retains the right to immobilize a delinquent borrower’s car on a temporary basis with a steel boot.

A registration loan differs from a flex loan in that it constitutes a one-time installment loan rather than an open-ended line of credit. The borrower receives a defined sum of money and has a specific amount of time to pay it back, whereas a flex loan borrower has a credit line that he or she can tap into at any time.

In Tennessee and Arizona, both registration lenders and title lenders are governed under the same regulatory umbrella and subjected to similar restrictions regarding loan terms and rates. Borrowers can decide based on their unique needs and circumstances which lending product suits them better.