NEW YORK (3/28/13)--Credit unions are a good, lower-cost option for consumers with short-term loan needs, according to a website that links consumers with payday lenders and is touting credit unions as a good alternative.
The site, PaydayLoan-Lenders.com, has published a list of alternatives to payday lending for individuals living in any state that prohibits payday loans or who need "low-cost options for borrowing," the New York-based site said in a press release.
Credit unions are often cited as lower-cost alternatives to payday loans for members needing short-term funds, said the Credit Union National Association. That's because they don't charge exorbitant interest rates. Some credit unions tie their programs to wealth-building loans that require putting part of the funds into a savings account and/or participating in financial counseling, as conditions for the loan.
Currently, 13 states prohibit the use of payday loans, said PaydayLoan-Lenders.com. "Countless more have restrictions placed on the interest rates applicable to the loans, making them virtually off-limits," said the company's statement. "For servicemen and women in the U.S. military, there are additional restrictions on the total amount of interest that can be charged.
"This means that there are millions of consumers whose short-term lending needs cannot be met by payday loans or cash advances."
The website offers a free contact list that includes "information on community-based credit unions, which are well-provided for across all 50 states and the District of Columbia." The list also includes military aid societies that offer financial planning and emergency loans and grants.
The site lists six tips for consumers. The No. 1 Tip: Approach a local credit union. "Community-based organizations called credit unions are popular and cheap ways to borrow extra money, particularly if you have a low-income or are saddled with a poor credit rating."
Other tips included using a low-cost credit card, negotiating with creditors, investigating using an overdraft on a checking account, researching extra protections and possibilities for military personnel, and asking friends, family, or an employer for a short-term loan.
Payday loans are prohibited in Arizona, Arkansas, Connecticut, the District of Columbia, Georgia, Maryland, Massachusetts, New Jersey, New York, North Carolina, Pennsylvania, Vermont and West Virginia, said the website. Maine allows payday loans only from authorized lenders and the loans have interest rate caps. Since 2007, military personnel have been limited to a 36% total interest rate cap on payday loans if available in their states.