The government might roll back CFPB rules that were designed to keep the payday loan industry in check. That’s bad news for consumers, because payday loans already come with terrible terms. The loans are often for small amounts — $500 or less — that must be paid back by the consumer’s next payday. The interest rates on those loans are astronomical. A recent report from the CFPB said the average interest rate on a payday loan is 400 percent. Thankfully, there alternatives to payday loans. Below are some options.
Credit Union Alternative Loan
Payday Alternative Loans (PAL) are a less expensive option offered by credit unions. PALs range from $200 to $1,000, with an interest rate of 28 percent. They also provide consumers with more of a cushion for paying it back — anywhere from one to six months. There are also some guidelines implemented by credit unions that protect borrowers. The PALs are not allowed to be rolled over and borrowers cannot take out three or more PALs within a six month time frame. The one catch here is that borrowers must be a member of a credit union for at least a month to qualify.
Credit Union Savings Loan
Another option from credit unions is a savings loan. If you need $500, the credit union issues you a $1,000 savings loan. You then have access to $500 right away, and another $500 after you pay off the loan.
A lending circle, like the one offered by Mission Asset Fund, is a group of consumers who collectively help each other out with loans. You apply online and join a group who then decides on the loans. There is a monthly fee (anywhere from $50 to $200) but the loans come with zero interest and can help boost credit scores.