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Pa. small-loans program saves consumers nearly 15M
HARRISBURG, Pa. (2/25/11)--Christmas gifts, taxes, school clothes and funeral expenses are just some of the reasons cited as ways to use the 43,000 small-dollar loans that have been issued by credit unions in Pennsylvania, using the Credit Union Better Choice program. Through the Credit Union Better Choice payday lending alternative product, credit unions offer borrowers a 90-day loan with a $500 limit. Since launching in 2006, the 43,000 loans issued by Credit Union Better Choice have totaled $20.5 million. The program has saved borrowers nearly $15 million over using a traditional payday lending product, according to the Pennsylvania Credit Union Association (PCUA). Since the program’s inception, 79 credit unions with 222 locations have agreed to offer Credit Union Better Choice loans. During the final six-month cycle of 2010, about 8,173 loans totaling $3.8 million were issued by credit unions. Also, borrowers placed $380,000 into savings accounts during the six-month period. The program is offered through participating credit unions and is a partnership of PCUA and the Pennsylvania Treasury. “Credit unions were founded on the principles of small dollar lending,” says Jim McCormack, PCUA president/CEO. “For many living paycheck to paycheck, a short-term loan can help meet unexpected expenses,” said McCormack. “Every Pennsylvanian should be afforded access to loans at reasonable fees and rates.” “The economy is moving in the right direction, but the reality is that many people--even those who are working--are still having trouble making ends meet, perhaps because of a large, unexpected expense like a car repair,” said State Treasurer Rob McCord. “Many of those people have too often turned to predatory, pay-day lenders to make it through to the next paycheck, but then they found themselves drowning in exorbitant fees and outrageous interest rates. The Better Choice program provides them an alternative, he added “This latest report is great news. It shows people are taking advantage of the opportunity to avoid bad loans--and saving themselves millions in the process.” A typical $500 payday loan costs consumers $15 for every $100 borrowed for two weeks, or roughly $450 during a 90-day period. A $500 Credit Union Better Choice loan costs consumers about $42.50 for the same 90 days and at the end of the loan term, the consumer has $50 in a savings account, which helps develop a savings habit. Also, the program builds upon this new wealth-building component by providing financial education to consumers to help them make better informed financial decisions. Pennsylvania consumers saved an average of 80 cents in loan fees for every dollar borrowed through a Credit Union Better Choice loan, rather than through a typical loan from a payday lender. This translates into nearly $15 million that consumers kept in their pockets by using credit unions that offer Credit Union Better Choice loans, said PCUA. To learn more about the program, use the link.
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