Dispelling Common Myths About TrueConnect Loans
TrueConnect provides a safe, affordable financial solution for employees who need a helping hand in times of financial hardship. This solution gives them a way to find relief when a financial emergency arises and help them avoid predatory lenders. Employees can take out a TrueConnect loan without regard to their credit score, and they can pay the money back with convenient paycheck deductions. It’s simple to manage and there is no cost to employers.
Common Myths About TrueConnect
One of the most common objections that TrueConnect hears is that employers are worried about the perception of offering employee loan solutions like TrueConnect, because it may appear that they don’t pay their employees enough. However, this is not true. There are many circumstances in life in which an employee needs money in a hurry, and a higher salary is not necessarily the solution. For example:
- Medical expenses: Medical debt is a big problem in the United States. So big that it is the number one reason that people file bankruptcy. When a medical emergency arises, individuals who do not have a financial safety net can find themselves struggling to pay medical bills.
- Student loan debt: Americans owe more than $1.56 trillionin student loan debt. This is a significant cause of financial insecurity. It means that many people find it difficult to put money into a savings account or retirement plan. This can cause serious problems when financial emergencies arise.
- Credit card debt: As of June 2019, the average U.S. householdcredit card debt is $8,398. When people are already having to make monthly payments to their credit card company, unexpected bills can be a major cause of stress, especially if they don’t have savings on hand to help them out.
- Emergency situations: At some point, everyone goes through an emergency situation – it might be the death of a loved one, unexpected medical expenses, car repairs, or home repairs. Half of all American households can’t cover an unexpected $2,000 expense within one month, including nearly 25% of households earning between $100,000 – $150,000 a year. When a financial emergency arises, they suddenly find themselves with nowhere to turn. Debt doesn’t only cause damage to a person’s credit score, but it also affects their physical and emotional wellbeing.
Embracing Employee Financial Security
Many consumer advocates and non-profits are embracing TrueConnect loans as a responsible alternative to credit cards and payday lenders. One of the main reasons is because these loans are a safe alternative to payday loans. Many people realize that payday loans are a bad idea, but unfortunately, when faced with a financial emergency, they may not have another option when they need money in a hurry. This means that they are vulnerable to predatory lenders for their emergency loans.
Why Predatory Lenders are Bad for Employees
Predatory lending is pervasive throughout the United States. It preys upon people who are already burdened by debt, those who have a low income, minorities, and the elderly. Predatory lenders take advantage of people who are in financial need and have no access to personal loans, auto loans, or mortgages and those who have a poor credit rating.
Payday loans are short-term loans which are due immediately on the next payday. In order to borrow, an individual does not need a credit check. They just need to provide proof of employment, a current pay stub, and proof that they have a bank account. The finance charges on payday loans are very high and the loan can be extended, leaving the borrower with extremely high interest. If a borrower ends up defaulting on the loan, the collection process is ruthless and can impact their credit score for years to come.
Why Credit Cards Can Be Negative for Employees
In the United States, credit cards are the most expensive form of debt, with interest rates as high as 21%. There are cheaper options available, but only for those who have a healthy credit score. Another downside to credit cards is that if an individual only makes the minimum payment each month, it can take years to pay off the debt completely. For example, if a person has a credit card with a balance of $8,000 an interest rate of 18%, and $160 minimum payment, it would take seven and a half years to pay off the debt, and by that time the cardholder would have paid $6,432 in interest.
Why TrueConnect is a Better Alternative
TrueConnect is a much better alternative to payday loans and credit cards because it provides employees with access to a safe, regulated bank loan, so they don’t have to worry about high interest rates or penalties. There is also no need for a credit score for them to qualify. What’s more, borrowers also get free Financial Choice financial counseling sessions.
There is no cost or financial risk for employers who offer TrueConnect loans. TrueConnect enables employers to offer a safe solution for employees in need, while at the same time separating them from their employees’ personal financial lives.
The Benefits of Offering TrueConnect Loans
TrueConnect allows employees to take out small-dollar loans that can be repaid through automatic payroll deductions. The application process for the loan is simple and doesn’t require a credit score, which is a huge benefit to employees whose credit history is less than perfect. Rather than having to go through a credit check, qualification is based on factors such as income and length of employment at the company. This helps to ensure borrowers can repay the loan within 12-months.
Loan repayments are capped at 8% of the employee’s paycheck. Whether you’re paid weekly, bi-weekly or monthly, only 8% of that total amount can be taken out for repayment. As a further boost to their financial wellness, each borrower gets six free financial counseling sessions. The benefits for employees are easy to see:
- Easy access to funds in an emergency
- Increased employee happiness
- Lower stress levels
- Improved physical and mental health
There are also many benefits for the employer, including:
- Improvement in employee engagement
- Increased productivity
- Reduced absenteeism
- Less employee distraction at work
- Increased employee loyalty
By making small-dollar loans available quickly, easily, and affordably, TrueConnect provides a much better employee loan solution than what is currently available. Not only does it protect employees from predatory lenders, but it also gives them the means to avoid the slippery slope of financial crisis. Contact TrueConnect today to find out how you can help your employees improve their financial health.