Credit unions seem to be bringing the image of payday credit facilities into a shade of respectability. Credit unions are offering better rates and unique savings attached which helps consumers in saving and not spending their money. The reputation created by payday lenders is lousy considering that they charge very high interest rates and the structure of the lending makes consumers not able to repay the loans within two weeks as stipulated by the lenders.
Besides, it appears as though the payday lenders would want to derive as much as possible from the consumer by rolling over the loans. The payday operators have been operating in the shadows of helping the disadvantaged consumer, yet they are actually hurting the consumer more.
Although it is not all strange to find banks being involved in the payday loans saga, you will mostly not see them advertising the services on Times Square billboards. And, with the credit unions entering the payday arena, consumers might benefit in one way or the other although experts argue that credit unions cannot bridge the gap that is created by typical loans and the payday loans.
Consider for example, a North Carolina State Employees Credit Union– SECU began offering “payday lending alternative” in what they called SECU program. It is an alternative to payday loans that could enable its members save a lot of money instead of opting for the typical payday loans. The financial institution makes available to its over 100,000 members an opportunity for them to borrow a maximum of $500 dollars in payday loans in each month.
With SECU program, it has very affordable interest rates. The rates outweigh those of payday lenders with a larger margin. Instead of SECU program charging huge rates of between 450% and 900% charged by most payday lenders, they only charge 12%, which though is still higher than what most banks would charge on personal loans.
And, provided that its members have more than $500 in their savings accounts, the payday loans offered by SECU could go as low as 5.5 percent. What this means is that consumers should try to explore the lending opportunities offered by the credit unions before they consider dealing with the typical payday lenders.
In a study that was conducted in 2007 by a financial nonprofit organization in Wisconsin, it showed that the payday lending attracts a typical fee that run between 650 percent and 780 percent. From that survey, it was revealed that the average payday loans range from about $100 to $500, and a typical $500 loan payable within two weeks would cost a consumer about $650 to repay it in total.
In that survey, it also showed that 91 percent of payday loans are usually made to repeat customers or the cash trapped workers who find themselves falling into incapacitating cycles of those high cost debts. Credit unions might not be able to cater for all the consumers who are hit hard by the credit menace, but for those who can qualify for these payday loans offered by credit unions, they should make a point of exploring them and steer clear of the typical payday loans.