What Is a Tribal Loan?
A tribal lender is a financial institution based on tribal land and operated by the Native American Community.
Because tribal lenders are based out of reservations, they have sovereign immunity to loan regulations governing the state they operate in.
Tribal loans have grown in popularity among borrowers with bad credit or no credit history who require money quickly.
Tribal loans can be considered quick short-term installment loans. Tribal loans are not the same as payday loans, and while their APRs can sometimes be as high as payday loans, they offer more flexibility.
The Benefits of Tribal Loans
Thousands of Americans use personal loans from tribal lenders to cover emergency expenses such as medical expenses, utility bills, or mechanic fees.
Tribal loans offer a convenient way to gain quick access to cash. Here you will find a list of companies offering tribal installment loans.
The approval process is fast and the money can be deposited into your account within the next business day.
The entire process of obtaining Native American loans is discreet. You will need to fill out basic information online.
Are Tribal Installment Loans Safe?
Considering the fact that tribal lenders are not obliged to follow any state statutes, it is normal to be concerned about whether tribal loans are safe or not.
There generally is nothing to worry about regarding the safety of tribal loans. One major concern is that tribal loans often carry high APRs.
Sometimes tribal lenders may partner with a third-party non-tribal lender to provide tribal installment loans. The former will operate as the official owner and thus collects a percentage of the APR.
Both of these lenders will be immune to the state’s laws. This is referred to as “rent-a-tribe.”
Tribal Loans Regulations
The Native American Financial Services Association (NAFSA) represents many tribal lenders. This legal body advocates for and enables tribal lenders to offer responsible tribal loans.
Both tribal and non-tribal borrowers can obtain Native American loans (also referred to as Indian loans). Tribal lenders can offer loans to customers even in states where payday lending is prohibited.
Their sovereign immunity also makes it impossible for a borrower to sue them.
Note: Tribal sovereign immunity is a safeguard that allows Indian tribes and their entities to govern their own affairs in ways that benefit the tribe. Several payday lenders have formed alliances with tribes to benefit from tribal immunity and avoid state usury regulations.
How to Apply for a Tribal Loan
You don’t have to be part of a Native American tribe to take out a tribal loan.
Each of NAFSA’s tribal lending members establishes their own loan eligibility conditions. Most lenders will impose age and work restrictions (for example, requiring borrowers to be 18 or older).
They will also often demand the borrower to provide proof of having a bank account.
To take out a loan from a NAFSA lender, borrowers must:
- Confirm their current employment status.
- Have a verified bank account.
- Earn more than $40,000 each year on average.
- Their typical period of indebtedness is less than two months.
The typical NAFSA borrower is a middle-income American who is unable to secure a loan from a traditional lender and prefers not to use payday loans.
Tips for Taking Out Native American Loans
The ability to self-regulate has led to a lot of controversy surrounding tribal loan lenders. Many are worried because they might not get any legal assistance in case of an institution’s malpractice.
Yet, caution is needed even when applying for other types of loans.
Thus, as long as you understand how tribal loan lenders function, there is no need for undue worry. For instance, the possibility of extra fees associated with tribal loans makes it important to have a solid plan to repay back your debt.
It’s critical to read all the fine print in order to fully understand exactly how much you will need to pay in terms of interest and fees for a tribal loan.
Tribal Loan FAQs
What is NAFSAA?
The Native American Financial Services Association (NAFSA), founded in 2012, represents about a dozen tribes involved in online small-dollar installment loans.
What is a tribal loan?
A tribal loan refers to a loan from a tribal lender; a financial institution based on tribal land and operated by the Native American Community.
Are tribal loans safe?
Tribal and federal regulations on payday loans are not always as strong as those in specific states, making tribal payday loans typically more dangerous for borrowers.
Can I get a tribal loan with bad credit?
Yes, borowers with bad credit (usually a credit score of less than 579) are usually eligible for a tribal loan, depending on the requirements of each specific lender.
What are tribal payday loans?
Tribal payday loans are short-term loans offered by a Native American tribe.