Credit Card Advances Less Costly Than Payday Loans
Payday loans are big business today. Currently, more than 22,000 stores payday loan is the collection of approximately 6 billion dollars a year from cash-strapped consumers. Some of these consumers are caught in an endless cycle of borrowing, repayment and borrowing again.
Why? Because fees and interest rates are so high and the repayment period so short.
A consumer borrowing $ 150 to bring it to the next pay could pay between $ 10 to $ 20 for that privilege, and money is due in 2 weeks. It may extend the payment period, but only with extra payment.
Do you think $ 10 for 2 weeks on a loan of $ 150 equals $ 240 per year … which would be 160% interest.
A cash advance on your credit card may include an additional 3 to 5%, and if you could not pay it back before the next statement, you will begin to pay interest. But so far the highest interest credit card is running at about 29.9%.
But what if your credit rating is so bad that you do not qualify for a credit card?
The banks in 17 states have chosen to take part in a 2008 FDIC pilot program called the Small-Dollar Loan Pilot Program. This is a 2 year program designed to show how banks can leverage to offer small loans to consumers with bad credit.
Loans are available for amounts up to $ 1,000 – and the interest rate up to 36%. This seems high until you watch that 100% more than people pay in the shops on payday loans. The proposed payment terms, while not “long term” are longer than those offered on loans pay day.
Credit unions in many states multiply as alternatives. They offer small consumer loans to the same people who usually frequent day center loan pay – those whose credit does not allow them access to credit cards at reasonable prices.
In addition to short-term loans, credit unions to offer credit counseling to help consumers end the spiral of debt. In many cases, the consumer is required to deposit a small percentage of the loan in a savings account – creation of a reserve fund, he or she may never considered before.
Credit unions are nonprofit institutions with an interest in the local community – and an interest in helping community members to prosper. You can visit the website of the Credit Union National Association to locate a credit union in your area and see if they offer low-dollar options for short-term loan.
And take their advice on money management. Learn to manage your money instead of letting you manage is a giant step towards a promising future.
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