Consumers in Washington D.C. have apparently flocked to credit unions since the district outlawed payday lending last year. Payday lenders whined that lending without 300% APRs was utterly unaffordable, but credit unions are proving that it’s possible to make long-term, low-dollar loans with interest rates as low as 16%.
The credit unions’ products vary, but generally they are loans of $300 to $1,000 with an annual percentage rate of up to 18 percent. Unlike payday loans, in which borrowers sign over part of their next paycheck for the cash advance, the credit unions’ new products have longer terms, from thirty days to a year.
Vann, 43 and a former clerical worker who is pursuing a career in TV production, got a $500 six-month loan from the Treasury’s credit union in January, at a 16 percent annual percentage rate. The money cleared her payday debt and put her on her feet. Now she has a checking account with the credit union.
“Credit unions were created to offer credit to people with modest means,” said Leslie Parrish, a senior researcher at the Center for Responsible Lending. “So, historically, it’s very much in keeping with their mission.”
It’s like stamping out weeds and watching adorable kittens grow in their place.
Credit Unions Slowly Fill Void As Payday Lenders Leave D.C. [The Washington Post]
PREVIOUSLY: Payday Loans Die In DC
RELATED: How To Find And Join A Credit Union
(Photo: Dr. Hemmert)
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@ucanthandle:
I don’t think that phrase means what you think it does.
My Credit Union will makes loans to people with terrible credit in order to help them rebuild it. They loan you the money and put it in your savings account, but there’s a hold on it (meaning you can’t withdraw). Payments are direct draft on a weekly, semi weekly, or monthly basis.
The good part is since that balance is part of your savings you do earn interest on it (To offset the loan interest) and my CU also has dividends to members based on your account balances. The terms are flexible, the rate is low (since the loan is secured), and the loans are for small amounts.
Also, alot of CU’s will ignore the reports from the Big 3 bureaus if you have a good payment history with them.
@laserjobs: A mark up is a markup, whether it’s 16% or 300%. Any percentage charged on the loan is a profit. Period.
i LOVE credit unions. i have belonged to a total of three in my life, still have accounts at two [one was in my previous state of residence only]
last week my car’s engine blew up. i kept trying to keep it running because it was paid for but when the repair estimate is twice the car’s RUNNING value…. it’s time to let it go.
i had the mechanic drop me at the nearest branch of my credit union to apply for a vehicle loan before going car shopping
the loan officer not only helped me figure out what price range to ask for by pulling up the kelly blue book values for me, she advised me that my credit report showed several recent credit checks [which i knew about, i had a credit card limit raised recently] and advised me [since i have never financed a car purchase before and know nothing about the workings] that i should NOT allow the car dealership to run a credit check since it wasn’t needed [what with the preapproval and all] and it might affect my credit history negatively
i can’t imagine a commercial bank taking that kind of trouble for a customer
as a point of interest, when the car salesman tried to run a credit check and i refused, he told me it was ‘to make sure i wasn’t a terrorist because they get fined if they sell a car to a terrorist’
um… no. credit checks do NOT get you super secret access to the terrorist watch list.
i refused, he told me to take it up with the finance guy. the finance guy didn’t even ask. he said ‘oh, you’re preapproved with the credit union? sign the intent to purchase, take the keys. when they finalize the loan have them call us to say the check is on the way. drive safe!’
i especially love that my credit union can communicate with a customer over the phone or via secure internal email 24 hours a day and when my debit card got posted twice for a transaction a couple of weeks ago, they fixed it with two emails back and forth and it only took about 3 days to get the money back.
@ucanthandle: And your point would be…? You’re doing a lot of shouting but it’s coming across as sound and fury signifyinh nothing…
The payday lenders are lying to Ohio voters in attempt to overturn one of the nation’s best consumer protection laws in November.
Watch here:
.
The payday lobby is spending millions on TV to deceive voters and convince Ohioans that 391% amounts to financial freedom! 391% is not freedom, it’s a trap! Payday lenders need to acknowledge that their business is predicated on their ability to trap people in debt!
Payday lending is a scourge on our families, our communities and our economy! VOTE YES ON OHIO ISSUE 5!
[www.yesonissue5.org]