Millions Thrown at Credit Unions to Offer Alternatives to Payday Loans
Pennsylvania credit unions don't just want to offer alternatives to payday loans - they're receive the monetary back-up to make this into a reality.
The Pennsylvania Credit Union Association and the state treasury kicked off a $20 million program this week that is designed as an alternative to short-term, high interest payday advances.
Credit Union Better Choice is being offered to members or those who meet membership requirements at 37 credit unions statewide to start, with 129 locations. Through the program, a consumer can receive a 90-day installment loan of up to $500, at an interest rate up to 18 percent. There also is an application fee, a maximum $25.
The credit union association said its costs are lower than those at typical, storefront payday cash loan lenders. Another advantage is that the participating credit unions will deposit 10 percent of the loan amount into a savings account in the borrower's name.
To support the program, the state treasury has agreed to put $20 million into an interest bearing account in the credit union system, the association said. The state Department of Banking also provided guidance for the program, hoping to talk people out of applying for a cheap payday loan.