Washington Post: Try a CU as payday-loan alternative
WASHINGTON (9/12/06)--Consumers should try a credit union as an alternative to payday lenders, suggests the Sunday edition of Washington Post.
The information is in a sidebar to an article that focuses on a Department of Defense study that found military consumers use payday lenders three times as often as civilian consumers. Fees for the loans can add up to an annual percentage of 400% to 700%.
"In the past six years, as banks have retreated from small loans, the number of payday lenders nationwide has more than doubled, to 22,000," the article said, quoting estimates from investment banking firm Stephens Inc.
The sidebar offers tips for preventing a financial crisis, including building a $500 emergency fund, reviewing expenses, asking for a salary advance, talking with creditors, talking with credit counselors, or talking with certain military relief societies and support center.
"If none of these options is feasible, find the cheapest money you can before taking out a loan," the sidebar says. In the first item after that advice, it says:
"Try your local credit union. Many credit unions near military installations across the country offer unsecured loans of $1,000 under less onerous terms than payday lenders, with APRs of 16%."
In the sidebar, Bill Hampel, chief economist for the Credit Union National Association, notes that some credit unions are experimenting with programs that allow borrowers to pay a one-time fee of $35 for access to short-term loans with an interest rate of 18% throughout the year.
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