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The Downward Spiral of Predatory Lending

Rain’s Earned Wage Access platform aims to eliminate dangerous predatory lending.
March 27, 2024

For millions of Americans living paycheck-to-paycheck, running short on cash between pay periods is a common struggle. When expenses out-pace income, many feel they have no choice but to turn to predatory payday lenders, starting a vicious cycle of high-interest debt that can be nearly impossible to escape.

At Rain, we aim to eliminate these toxic products and empower employees to thrive. Rain’s Earned Wage Access platform provides a solution that allows workers to access their earned pay as they go - with no hidden fees, interest charges, or debt traps.

The Vicious Cycle

To fully appreciate Earned Wage Access as a vital benefit, it's essential to understand the debt trap that ensnares so many hardworking Americans. The typical payday loan seems harmless, but a short-term cash advance, usually $500 or less, carries a $15-$30 fee for every $100 borrowed.

However, while relatively small upfront, those fees translate to annual percentage rates that routinely exceed 400%. A two-week payday loan of $300 with a $45 fee equates to an exorbitant 391% APR (annual percentage rate).

With such high-interest rates, it's no surprise that over 80% of payday loans are rolled over or reborrowed within 30 days. This perpetual cycle of new loans to cover the old debt, with accrued fees piled on top, is how the payday lending business model traps its customers.

Employer-Facilitated EWA as a Solution

Earned Wage Access (EWA) provides a lifeline from payday lending's suffocating grip. Employees can access funds they've already earned instead of taking out new high-interest loans they can't afford to fully repay. There are no excessive fees or interest charges, and there is no need to continually re-borrow to stay afloat.

Earned Wage Access acts as a financial safety net, allowing workers to cover unexpected expenses or bridge the gap until their next paycheck. 

This approach empowers users to cover short-term needs responsibly without enabling a cycle of new liabilities. Earned Wage Access gives workers a healthier, more sustainable alternative to predatory lending's debt traps. When money runs tight, they can avoid those wealth-stripping payday loans and triple-digit interest rates pushing financial stability further out of reach.

Rain’s Financial Wellness Benefits

Rain aims to help foster healthy money management behaviors. Rain’s EWA program offers employers accrued gross pay guardrails to act as an actual financial safety filter, not a debt replacement. Rain also provides free educational resources for budgeting and saving.

This approach helps employees utilize Earned Wage Access responsibly while breaking away from predatory lending's downward pull. By getting funds they've already earned, workers can cover cash shortfalls without taking on crippling new obligations that only make matters worse.

Earned Wage Access is a safe, responsible solution that helps employees regain control over their finances and break free from predatory lending's devastating debt traps. Rain empowers workers to meet short-term needs while elevating long-term financial wellness by providing an alternative to high-interest payday loans without creating new liabilities. Rain's commitment is to eliminate reliance on predatory products and provide resources that put economic security within reach for all.

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