What is a payday loan bond?
A payday loan bond protects consumers from unethical and unlawful business practices. It guarantees that payday loan businesses appropriate customer funds correctly. If you – as a payday loan broker or lending company – fail to provide services as promised, someone may file a claim on your bond.
In some states, this bond is required as part of the business licensing process. You may not be allowed to operate legally in your state without it. Surety bonds help build trust with potential and current customers, instilling confidence in your business.
This bond may go by various names, such as payday advance bonds, payday lender bonds, money lender bonds, and small loan broker bonds.
What is a payday loan?
A payday loan is a short-term loan where the lender extends high-interest credit based on the borrower’s income. Lenders offer these loans with very high interest rates in exchange for short-term credit issued immediately. No collateral is required, making these personal loans unsecured. Other names for payday loans include check advance or cash advance loans.
Get Your Payday Loan Bond:
- A payday loan is a short-term loan where the lender extends high-interest credit based on the borrower’s income.
- A payday loan bond protects consumers from unethical and unlawful business practices.
- Some states may base your bond requirement on the number of business locations you have.
How do payday lender bonds work?
Payday lender bonds are contracts between three parties:
- Surety: The company that issues and underwrites the bond
- Principal: The payday loan business that must buy and post the bond
- Obligee: The state that requires the principal to post the bond
If someone files a claim against your bond due to unethical or illegal business activity, your surety may settle the claim for you (if you’re unable or unwilling). You must then reimburse the surety for the amount they paid for you.
How much does a payday loan bond cost?
The bond amount required can vary significantly by state. Some states may base your bond requirement on the number of business locations you have. You may need to post a bond even if you operate solely online. You will pay a small percentage of the total bond amount as your annual premium.
Note that some sureties consider these bonds high risk, which may affect your rates. ZipBonds can help match you with the most affordable rates available for payday loan surety bonds. Select your state below to start an application, or contact us to speak with an agent directly.
Get a Payday Loan Bond in Your State
ZipBonds is the fastest and most secure way to get the license and permit bond you need. We take out the pain of long, complicated applications. Most of our bonds are approved and processed immediately.
Founders Ryan Swalve and Zach Mefferd formed the vision for ZipBonds.com when they realized how overly complicated it was to help clients place surety. The frustration of being unable to incorporate the technology they’d used in other insurance-focused projects left them thinking “there has to be a better way.”
Fast forward a couple of years, and that better way is the impetus of everything we do at ZipBonds. We constantly look for innovative ways to improve the bonding process for our clients and agents. Our team comprises individuals who understand all angles of surety – for companies, agencies, and individuals. Incorporating everyone’s point of view to improve the process while simultaneously integrating cutting-edge technology is what sets our business apart.