Payday Lenders or Credit Unions

Payday Lenders or Credit UnionsMany, when they find themselves in need of quick cash, turn to payday lenders. Now there is another alternative. Some credit unions are now offering loans of this type and yet the borrower isn’t required to pay the high fees associated with direct payday loans. Payday loans have helped many through financial difficult times, but many choose not to make use of this money responsibly. Some use the funds to gamble while others use it to splurge on a dinner out, an impromptu vacation or something of that nature. The fees for doing so are incredibly high. Credit unions allow users to borrow funds quickly, but they set restrictions on doing so to ensure more financial responsibility in the future.

Payday lenders offer funds to those who need cash quickly and yet don’t have the credit needed to get cash from a traditional lender. The loan must be repaid in a very short time and lenders require the borrower to write a post-dated check to ensure they get paid on the loan. The default rate for a loan of this type tends to run between four and six percent and many borrowers find that they need to roll the loan over to have more time to pay it. This leads to more fees being tacked on. These lenders have been very helpful to many in difficult situations, but those who don’t use the loans responsibly may find themselves in a cycle of borrowing and repaying the loans.

Some credit unions have opted to join the direct payday loans industry with certain modifications. The credit union may loan the customer a small amount, up to $600 in many cases, and charge a flat fee to the customer to borrow these funds. This, in most cases, is much less than what the borrower would pay to a payday lender. The difference is in the repayment of this loan. When the borrower repays the funds, five percent of this money is placed into a savings account. As the average payday customer borrows money a number of times in a one year period, this savings account grows. The purpose of this is to have the customer build up an emergency fund so loans of this type will no longer be needed.

Credit unions aren’t making a great deal of money offering this financial solution, but they do it to provide customers with the tools they need to establish a solid financial footing. The credit unions aren’t spending a great deal of time or money advertising these loans either which saves them money while allowing them to provide the financial solutions customers most want and need.

Credit unions offering loans of this type aren’t likely to run companies offering direct payday loans out of business anytime soon. When certain states crack down on the interest rates charged by these lenders, they begin offering new services. This may come in the form of title loans or it may be high-interest consumers loans. As customers come in looking for these items, the business continues to operate at a profit.

If you find yourself in need of cash, payday loans are one option with credit unions being another. Only you know your current financial situation. Consider all options to determine which is best for you. Furthermore, be sure to read the terms and conditions of a loan before signing even if you have obtained one in the past. This is true of both credit unions and payday lenders. This industry is being looked at closely and you want to ensure you understand what you are paying for and how much you will be charged with any loan you decide to make use of.

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