Payday loans as seen on TV

personal loans western sky financialWestern Sky personal loans- have you seen the advertisements?

As I was doing research for last week’s post on payday loans, I ran across the Western Sky Financial website. I had seen the ads for these personal loans on TV for the last year or so, but hadn’t paid much attention since I teach people to avoid the bondage of debt.

But once I found their site and read the information about their personal loans and their business model, I knew I had to write about it.


Because (I’ll choose my words carefully here), this is probably the riskiest personal loan product I’ve ever seen, bar none.

Personal Loans With a “Bite”

These are not like the payday loans that I wrote about in the last post. These are installment loans, meaning you borrow money and then pay a monthly payment until the debt is satisfied.

Pretty straightforward.

So why are these particular personal loans so bad?

Let me count the ways.

“The interest rate on a typical loan of $2, 600 is 135% with an APR of approximately 139%. Borrowers may prepay their loans at any time without penalty. There are no upfront fees. If you are approved and your loan is funded, we will collect a $75 loan origination fee from the proceeds of the loan.”

Wow! That’s a big fee on top of a huge interest rate, and a bad deal to be sure. But that’s only the beginning.

Loan Product Borrower Proceeds Loan Fee APR Number of Payments Payment Amount
$10, 000 $9, 925 $75 89.68% 84 $743.49
$5, 075 $5, 000 116.73% $486.58
$2, 600 $2, 525 139.22% 47 $294.46
$1, 500 $1, 000 $500 234.25% 24 $198.19
$850 $350 342.86% 12 $150.72

Holy high interest rates Batman!

But let’s make it a little more real by demonstrating just how some of these numbers add up. I’ll start with the smallest loan on the “Rates” chart above.

Let’s say you’re in a bind and want a personal loan of $500 from Western Sky Financial. In order to get this loan they will charge you a $350 loan origination fee that is taken from the proceeds of the loan. That means that in order to get the $500 you need, you have to actually borrow $850.

Then an even better thing happens. They charge your an interest rate of 342.86% for the “privilege” of taking out the loan.

What the… are they serious?

Yes… yes they are.

So if you spread the payback over 12 months, that means your payment would be $150.72 per month. 12 payments of $150.72 add up to $1, 808.64. In just 12 months, you had to pay back more than $1, 800 in order to borrow that $500 that you needed.

That’s INSANE!

But what if you want to borrow a larger sum of money, say $10, 000?

According to their own numbers, the loan origination fee is $75, which means you only get $9, 925. The interest rate is “only” 89.68%. When you pay that back over 84 months, your payment will be $743.49, which means you’ll end up paying $62, 453.16 for the privilege of borrowing that $10, 000.

All I can do at this point is shake my head and ask myself, “Do people really take out these outrageous personal loans?”

“Please be aware that not all applicants will qualify for every loan product or the lowest interest rate for a particular loan product.”

Wow, do the rates go even higher? I guess you can only find out by filling out an application.

So those are the numbers.

Western Sky Financial is Not Bound by U.S. Law

As I continued through the site, I found something else very interesting and unusual. As it turns out, Western Sky Financial is owned by a Native American individual who is a member of the Cheyenne River Sioux tribe, and the business is located within the boundaries of the Cheyenne River Sioux reservation.

Why is that important?

It’s important because if you know anything about Native American reservations in the U.S., you know that they are considered to be sovereign nations that reside within the borders of the United States. Therefore, the “Terms of Use” page states that all loans are subject to the laws of the Cheyenne Sioux, and that no other state or federal laws apply. It reads as follows:

“All loans will be subject solely to the exclusive laws and jurisdiction of the Cheyenne River Sioux Tribe, Cheyenne River Indian Reservation. All borrowers must consent to be bound to the jurisdiction of the Cheyenne River Sioux Tribal Court, and further agree that no other state or federal law or regulation shall apply to this Loan Agreement, its enforcement or interpretation.”

This matters because the laws of the Cheyenne River Sioux may be substantially different than U.S. laws. I have no knowledge as to whether they are or not.

But think about it, if you are dumb enough, or desperate enough, to take out one of these personal loans in the first place, you may not protected by the U.S. legal system if you run into problems.

Now, I’m sure that the Cheyenne River Sioux are honest and have a fair and equitable legal system in place. But the fact is, unless you’re familiar with that legal system, you have no idea what you’re getting into.

Interesting facts

  • The Community Financial Services Association of America(CFSA) is the national organization dedicated to advancing financial empowerment for consumers through small dollar, short-term loans. Now in its 12th year, CFSA was established to promote laws and regulations that protect consumers, while preserving their access to credit options, and to...

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