MADISON, Wis. (6/5/09)--UW CU is rolling out Paycheck Advance, an alternative to traditional payday loans, on June 15. The program will give members in good standing access to a short-term loan without the traditional loan application process and will offer an interest rate dramatically lower than the average offered by storefront payday lenders. The $1.080 billion asset, Madison, Wis.-based credit union’s Paycheck Advance program has a fixed interest rate of 21.75%. The national average interest rate for payday loans in 2008 was 391%, according to The American Prospect
, The New York Times
and Consumer Credit Counseling Services, said the credit union in a press release. “We applaud Wisconsin legislators for recently drafting legislation which would protect consumers by capping the payday loan interest charged by licensed lenders at 36%,” said UW CU CEO Paul Kundert. The Paycheck Advance program will offer loans in amounts from $50 to $500, and require a $50 minimum payment per month. “The problem with storefront payday loans is that when you factor in the fees and the finance charges, it makes paying off the loan very difficult, if not impossible,” said Chief Credit Officer Mike Long. UW CU’s Paycheck Advance has several advantages. It:
* Requires no application fee; * Removes monthly service fee; * Has no prepayment penalty; * Can be used multiple times without reapplying; and * Provides a reasonable period for repayment.
“Paycheck Advance is a better alternative than a traditional payday loan,” Long said. “It provides members access to small, short-term loans with an option that does not subject them to unreasonable rates and fees. In addition, our financial specialists are available to work with members to determine if this product is the right fit for their situation or if they qualify for a product that is even more beneficial.”