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An Introduction to Tribal Loans

If you’re in need of money and require it quickly, you only have so many options for acquiring it. However, chances are there’s an avenue you’re not familiar with as well, though it’s becoming more and more popular by the day. Tribal loans have a lot in common with payday loans and other forms of conventional borrowing, but with some important differences worth knowing about. Before you pursue any other path toward securing that needed amount – or just giving up – continue reading to learn more about what tribal loans have to offer.

A Quick Word About Due Diligence

It’s important to point out early on that, while these types of transactions certainly have their unique advantages, there are going to be good and bad lenders just like you can find reputable and disreputable operators in other forms of lending too. For your own financial well-being, it’s important you always investigate any entity you accept money from to ensure they’re trustworthy.

What Are Tribal Loans?

The main distinction between tribal loans and other sources of credit is right in the name: these are loans offered by Native American lenders. Not all Native American lenders are giving what are termed “tribal loans”, though.

Due to circumstances that are unique to reservations, tribal loans aren’t susceptible to the same amount of laws, regulations and red tape that often prove to be a challenge when dealing with other lenders. Amongst other things, this makes it possible for a tribal loan to last, generally, between 10 and 18 days and for as much as $1,000 or even more depending on the individual it’s for. It could also be for as little as $200.

Of course, for this kind of short-term arrangement, tribal loans come with higher interest rates. Borrowing $600 could involve a 30% fee, meaning you’d have to pay back $780 when the loan comes due.

Installment loans – Recommended

There are also installment loan tribal lenders that will offer a repayment time frame of between 20 and 40 weeks. This is usually for much larger sums (e.g. $1,500), but it makes paying the lender back far more manageable.

Requirements for Tribal Loans

Still, despite the fact that tribal loans aren’t subject to as much scrutiny from the authorities as other lending vehicles, there are still some requirements involved. Lenders will need to see proof that a borrower:

  • Has a job (as well as how much they make)
  • Is 18 years of age
  • Has a checking account

As you can see, these aren’t very unreasonable requirements. They’re basically the bare minimum necessary to ensure the borrower has the ability to pay the loan back. Tribal lenders also don’t care about your credit score or financial history. So even if the borrower has a part-time job, living on Social Security, SSI or defined private (or state) pension plan there might still be a chance for an approved application. Borrowers are not subjected to checks from Experian, Equifax or Transunion.

Upon accepting a loan from one of these lenders, the borrower agrees to certain terms. These include providing written consent/authorization to the company utilizing an electronic transaction known as an ACH (Automated Clearinghouse) that can take the amount the borrower owes out of their personal account on the date repayment is due.

The Difference Between Tribal Loans and Similar Alternatives

Many of you may be thinking that tribal loans sound exactly like payday loans. While you’re right that they have many similarities, they aren’t the same thing.

For one thing, these loans are usually offered online, whereas payday loans happen at a physical business. As the company providing the loans operates as an arm of their tribe, they are not encumbered by certain state laws that keep other lenders from participating in handling the same digital transactions.

Also, in many areas throughout the country, payday loans face opposition from many policymakers. As we’ve already discussed, this isn’t going to be a problem for tribal lenders.

Finally, tribal loans are available to far more people than even payday loans. These lenders have far fewer requirements of people in need of cash which makes them available to a whole new market that had to go without in the past.

The Benefits of Using Tribal Loans

By now, it’s probably become clear that there are a number of benefits unique to tribal loans. The first is that, as we just mentioned, almost anyone in need can secure one of these loans. If you’ve been rejected by lenders in the past, learning about tribal lenders should give you a sense of relief.

Secondly, you can secure them through the Internet. This is a huge advantage for people who may not live in an urban area where payday lenders are usually located. In the past, you may have been perfectly qualified for payday loans, but lacked access to the companies that handled them. Going forward, as long as you have an Internet connection, this won’t be a problem.

Third, tribal loans can work as lines of credit too, which is especially helpful now when so many lenders are careful about whom they extend such lines to. This way, those in need can be approved for a certain amount, but only borrow the sum they need at that moment. This works both ways, too, as the borrower can then pay the lender back in smaller, more manageable amounts too.

Why Tribal Loans Are Growing in Popularity

The main reason that tribal loans are growing in popularity so quickly is simply because people still need money – like they always have – but in the wake of the Great Recession, there aren’t nearly enough lenders who can accommodate them. Most are simply choked by red tape as well.

The majority of banks have all but completely stopped giving personal loans too. Perhaps as much as 85% of the population wouldn’t qualify for one. This is a real problem for those who need a loan, but don’t have any real collateral to offer.

There was a vacuum in the market until about five years ago when many tribes began offering small loans. Nowadays, tribal lenders are dominating this important market.

Their popularity is especially understandable in light of the hybrid version of lending many of them bring to the table whereby they operate much like a payday lender, but can offer customers the long-term setup of an installment plan.

So if you find yourself in need of a loan, consider what tribal lenders have to offer. As we mentioned at the beginning, it’s important that you do your research to make sure you’re borrowing from a reputable company. You should also probably opt for a long term installment plan to give yourself a bit more leeway on paying it back. However, so long as you practice due diligence, this could be your saving grace in a time of need.

Grace Chen
Grace Chen - Writer & Editor
A graduate of the Haas School of Business, University of California, which is one of the top three (3) business schools in the U.S., Grace Chen has 10 years of experience in this field and have been delivering stellar business content through her written word. She’s the chief editor of Communicate Better and has written and edited thousands of content published in various online and printed media, including the NYSE-sponsored research studies and MEC Global. Connect with Grace on LinkedIn, https://www.linkedin.com/in/grace-chen-9254ab8/