$120 for a $100 payday loan?
September 18, 2009 | Nevada, alternatives, industry | Comments (0)That’s how much the Nevada Federal Credit Union charges for its payday loan “alternative.” From the article:
In the first seven months of this year, the credit union has issued 12,000 loans, amounting to about $8 million, an estimate based on borrowers taking out the maximum loan of $700. A single payday loan costs $60 regardless of whether the loan is for $100 or $700. Also, note that the $60 is an application fee, and doesn’t guarantee that an applicant will get the loan.
You would think that Nevada Federal was just rolling in the dough, charging people a relatively high fee for a small amount of cash for an even smaller period of time — not to mention the ones who were turned down.
Not so, Beal said. There is a fair amount of risk involved in the payday loan “alternative” and the fees offset the losses, and it costs the credit union $55 to service the loan, he said.
Some people haven’t repaid their loans, and if the credit union isn’t able to collect within a few weeks, it writes it off as a loss.
This year, Nevada Federal has already lost $75,000 from defaults.
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