HARRISBURG, Pa. (3/11/14)--More than 87,000 short-term loans have been issued in Pennsylvania through the "Credit Union Better Choice" since the program was launched in 2006---saving borrowers more than $27 million over using a traditional payday lending product, the Pennsylvania Credit Union Association (PCUA) reported.
"For more than seven years, Better Choice loans have been meeting the emergency loan needs of credit union members," said Patrick Conway, PCUA president/CEO. "The continued growth in the volume of loans demonstrates the ongoing need for this program.
"'Better Choice' is an example of the people-helping-people philosophy of the credit union movement and demonstrates our difference from for-profit financial providers," he said, adding, "I encourage Pennsylvanians who are not using a credit union to consider switching to one for all of their financial needs."
The "Credit Union Better Choice" loan is a payday lending alternative product where credit unions offer borrowers a 90-day loan with a $500 limit. Reasons cited for loan purpose have included Christmas gifts, taxes, car repairs, heating fuel and funeral expenses.
The "Credit Union Better Choice" was developed through a collaboration of the PCUA, Pennsylvania Treasury Department and the Pennsylvania Department of Banking and Securities.
Currently, 65 credit unions with 178 locations offer "Credit Union Better Choice" loans across Pennsylvania. During 2013, 11,178 loans totaling more than $5.5 million were issued, PCUA reported. Borrowers also placed more than $551,710--10% of the loan total--into savings accounts.
A typical $500 payday loan costs consumers $15 for every $100 borrowed for two weeks, or about $450 over 90 days. A $500 "Credit Union Better Choice" loan costs consumers roughly $42.50 for 90 days. At the end of the loan term, the consumer has $50 in a savings account.
Pennsylvania consumers saved an average of 80 cents in loan fees and costs for every dollar borrowed through a "Credit Union Better Choice" loan rather than through a typical loan from a payday lender. That translates into more than $27 million consumers kept in their pockets by using the loans.