26 Jul Credit Unions: Lots Better Than Payday Loans
Payday loans are horrible.
- Interest rates as high as 1,500% per year (that’s One Thousand Five Hundred percent per year, and yes, we’ve seen them this high).
- Wage withholding.
- Repayment terms that lock you into an endless cycle of borrow and pay that you can never get out of.
- Abusive collection practices.
So why do people borrow money from people like this on such outrageous terms? Because, as one blogger put it, “When the landlord is pounding on the door demanding rent, the kids are crying because the kitchen is empty, and the electric company is hauling the meter out of the house for non-payment, what would you do?”
Well, what can you do other than using a payday lender? The answer? Check with a credit union.
When the District of Columbia capped interest rates at 24%, the payday lenders closed up shop. Who stepped in to fill the void? Credit Unions. As The Washington Post reported in the article, “Credit Unions Slowly Fill Void as Payday Lenders Leave D.C.,” and USA Today in, “Breaking the Cycle of Payday Loan ‘Trap’,” credit unions are offering low income people small, short-term loans at interest rates that you don’t think are a misprint.
As Leslie Parrish, a senior researcher for the Center for Responsible Lending noted in The Washington Post article, “Credit unions were created to offer credit to people with modest means. So, historically, it’s very much in keeping with their mission.” Not to mention that a 24% loan is a whole lot better than a 300% loan.
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