What about the high “fees?”
November 9, 2008 | Arizona, alternatives, industry, states | Comments (2)This story has the Payday Pundit’s blood boiling. How stupid are reporters?:
Some of Alhambra’s 3,600 members do patronize payday lenders for short-term cash needs, McConnell said. That’s why the credit union developed a loan designed to compete head on.
It’s even called the “advance payday loan” and features an interest rate of 12 percent annualized, plus a $15 monthly fee for as long as a loan stays open. Members can borrow up to $525.
What does the $15 montly fee add up to if calculated as an APR?
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For a two-week $100 loan the APR would be about 403%. For a $300 loan the APR would be around 143% (but of course someone who only needed an extra $100 would save money by choosing 403% over 143%).
What the article doesn’t say is whether people have to meet certain criteria to become a member of the credit union and whether all members automatically qualify for the loans, i.e. even if they are currently unemployed or don’t earn very much money. Some so-called payday-loan alternatives are more restrictive than the average payday loan so they can be made at a lower APR because the clientele is less likely to default. But that doesn’t mean the people who are shut out do not need or would not benefit from a loan.
I’m just glad that Issue 5 won. Good luck to the employees who MAY lose thier jobs, but I think this was the best move for Ohioans.