Case study: Food truckin’: Chris takes out a $10,000 line of credit
Chris has run his food truck for just over 14 months when he notices that his sales take a major dip over winter since fewer people want to eat outside when it’s cold. He wants a 12-month $10,000 line of credit to make sure he can pay for supplies over the slow season.
Bypassing the hassle of his bank, he compares lines of credit offered by nontraditional online lenders Kabbage and OnDeck, looking at their fees and ease of use.
Kabbage | OnDeck | |
---|---|---|
Fees | 1.5% to 10% fee of the principal for first 6 months and 1% of remaining principal for last 6 months. | $20 monthly maintenance fee. |
Ease of application |
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Chris finds that both lenders offer easy applications with fast turnaround, so he instead focuses on what he could face in interest and fees. With Kabbage, Chris first needs to break down his $10,000 into 12 monthly payments — about $835 a month. He’s finally able to figure out that he could pay from $150 to a whopping $1,000 a month in fees on top of his already high monthly payment for at least the first six months of his loan, which could drop to $50 or less for the remaining six months.
With OnDeck, Chris could pay $240 in fees over the life of the loan, along with up to $1,400 to $4,000 in interest, depending on how much he withdraws from his line of credit.
Chris ultimately makes his decision based on transparency, choosing OnDeck for its easy-to-understand rates and fees that make it easy to predict what he could end up paying over the life of his loan.