I came across this article in this week’s Credit Union Times about the Texas Credit Union Leagues’ new payday loan alternative effort:
Fifty-four Texas credit unions will soon have a turnkey payday loan alternative product thanks to the National Credit Union Foundation’s REAL Solutions program and the Texas Credit Union League.
The new product will be launched in participating credit unions on March 30, the league said, after the CUs have trained their staff in how to “sensitively” offer the product.
“Our goal is to keep more money in the hands of the borrower,” said Natasha Melugin, REAL Solutions program director for the Texas league. “Hundreds of payday, auto title and other small predatory lenders litter our streets, preying on financially distressed consumers. These ‘rescue’ loans intended to bailout the borrower in fact keeps them in a vicious debt-cycle.”
Unlike most payday loans available in Texas, the new loan products will carry a much lower interest rate at 18%. The loans will also offer a longer repayment term than other payday loans and require the borrowers to deposit 10% of the loan amount in a savings account.
The league reported that 60% of payday loan borrowers in the state repeatedly roll over their loans. In many cases, borrowers will wind up paying more in fees and interest than the original loan amount, the league said.
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Click Here for REAL Solutions Resources on Payday Lending Alternatives