pay day loan alternatives

gmakerley · Posted: Mon Aug 03, 2009 11:28 am Post subject: pay day loan alternatives

this morning's edition of USA Today has a front-page article entitled "Some credit union loans no deal."

because i have often come out in favor of credit unions as an alternative to all sorts of other lenders, i wanted to bring this to everyone's attention. not every credit union is the same (obvious) and some are on the edge of usury, if not there already (not so obvious).

the point in question is what some credit unions are doing as an alternative to payday loans, which are nasty little concoctions that cost american wage-earners hundreds and thousands of dollars. it seems that there are credit unions offering short-term loans which also require application fees of as much as $70.

as noted by the National Consumer Law Center, if you were to take a loan for $400 for a 14-day period, the charging of a $70 application fee renders an equivalent Annual Percentage Rate (APR) of 455%.

last week, the National Credit Union Administration issued guidance to its members, "alerting them to the 'risks, compliance issues and responsibilities' associated with a short-term loan program." as one credit nion president pointed out, if a proposed interest rate cap of 36%, including fees, were put into place - "that would work out to less than $10 per loan and wouldn't cover his credit union's costs."

the bottom line: be careful no matter who your lender is to ensure you're not getting overcharged. beware of payday loans - i believe they're hazardous to your health (economic, of course; but overall health as well), but watch out for those who provide an alternative, that said alternative isn't just as pricey as what it's supposed to protect you from.

eric1 · Posted: Mon Aug 03, 2009 5:45 pm Post subject:

Thanks for the post George. There is something about the term "Credit Union" that gives people a false sense of security....as if the Union is looking out for them.

jenkin7 · Posted: Tue Aug 04, 2009 2:14 am Post subject:

Hi George,

Thanks a lot. The post is an eye-opener for all those who think the short-term loans offered by the credit unions as a real alternative to payday loans. Many borrowers fall prey to the apparent charm of these short term loans and end up in a debt-trap. People must be cautious and they must weigh the pros and cons carefully before taking such short-term loans.

sara · Posted: Tue Aug 04, 2009 2:18 am Post subject:

Hi George,

Thanks for sharing this information with the community.

It's true that borrowers need to be very alert about all their creditors and should understand what kind of fees they would be charged in case if they are late on their payments or they default on their payments. A proper knowledge of fees and other details would save them from the scams which we come across every other day.

Take care.

gmakerley · Posted: Tue Aug 04, 2009 7:31 am Post subject:

and there's yet another article in today's edition of USA Today, again discussing the credit unions and payday loans and payday loan alternatives.

some of the plans that credit unions have incorporate a kind of "forced" savings account on the borrower, which is eventually a good thing. nevertheless, banking mentality exists in an awful lot of credit unions - profit, profit, profit over service in too many cases. that's not to say they don't do a lot of good - some people would never get an opportunity to use credit were it not for credit unions' lenient attitudes towards their members.

manoj_gopale · Joined: 16 Feb 2009 Posts: 481 0.49 Dollars($)

George,

This is something like blessing (??) in disguise as both the payday loan lenders and the credit unions are all the same when it comes to their modus operandi.

nice information...Payday loans has to be stopped ..alternatives could be borrowing it from your collegues,make a small fund in your own organisation which will eventually help each and every member of the fund....

keep in touch...

gmakerley · Posted: Tue Aug 04, 2009 8:50 am Post subject:

well, i wouldn't say that credit unions and payday lenders share the same bed, manoj. i think the latter are a bit more cutthroat.

and your idea of a small fund in your own organization - well, that's pretty much the idea of a credit union to begin with; or, for that matter, a savings bank.

Jessica · Posted: Wed Aug 05, 2009 5:47 am Post subject: credit union short term loans

I agree with you George. Whether it is a short term loan from a credit union or a payday loan, one needs to check out the loan costs. The short term loans which are offered as an alternative to payday loans are no less costly than pdls. Moreover, there are credit unions which provide short term loans via a third party payday lender. In such a case, the cost isn't much different from that of a payday loan. So, applying for a loan with a credit union doesn't necessarily mean that you'll get a low cost loan.

There are credit unions which may claim to charge 0% rate on their short term loans. But application fees and other loan costs increase the effective APR to a 3 digit figure. So, the next time you seek a short term loan from a credit union, check out the APR, fees and payment structure. Ask the credit union if they'll allow you to pay off the dues in installments in case you cannot pay the balance within the due date.

Well, there's one good thing about the short term loans offered by credit unions. Most of the credit unions do not allow you to rollover the balance. But payday loans can be rolled over and this is what leads to additional fees and interest charges thereby adding on to the outstanding debt.

Regards,

Jessica.

kas_mah80 · Joined: 06 Sep 2009 Posts: 31 -3.10 Dollars($)

hi,

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gmakerley · Posted: Thu Sep 10, 2009 11:13 am Post subject:

kas i can't say i'm sure of the relevance of your ideas to the topic here, but i understand what you're saying. i think those with payday loans - those inquiring as to how to make a payment, etc. - all of whom exist on other threads - are your target audience.

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