Waterloo, IA
- - - It's a trap many Americans fall into every day. Your car breaks down, or you receive an unexpected
bill, and you are unable to find the available cash to pay the amount due. Luckily, there's a payday
lender just around the corner, and the immediate cash is a quick fix to your looming problem.
The original purpose of a payday loan was for a one-time emergency situation; however, according to
a study conducted by the Center for Responsible Lending in 2003, 91% of all payday loan users have five
or more payday loans per year. With lenders charging 390% - 780% Annual Percentage Rate (APR), it's easy
for borrowers to fall into the pattern of repeat loans.
The Iowa House and Senate are considering legislation that would cap the interest rate on car title
loans - one form of payday lending. A cap on interest rates for these businesses could force them out of
the state, and legislators want to know what other options consumers will have once that happens.
Beginning March 1, 2007, Veridian Credit Union will be offering an affordable alternative for consumers
in need of cash. It's called a Payday Alternative Loan (PAL), and it offers a much more reasonable 21% APR.
"Fees for payday lenders generally run between $15 and $30 per $100 borrowed," said Jean Trainor,
President and CEO of Veridian. "Those large fees make it extremely difficult for someone to pay back a
loan in a reasonable amount of time. The PAL is designed as an affordable alternative."
A Veridian PAL will offer a loan of up to $1,000 and a repayment term of up to six months.
The most distinguishing factor of the PAL is that a savings account is also established as part of the
process. When an individual requests a PAL, the amount requested is automatically doubled. For example,
if an individual requests $500, the loan amount would be for $1,000. The additional $500 would be deposited
into the borrower's savings account and held until the loan is paid in full. Both the repayment term and
the savings component allow individuals to break the cycle of constantly renewing a loan.
"By including the savings component in the PAL, we are meeting the immediate needs of our borrowers,
while helping them develop healthy savings habits," said Trainor. "The savings account allows an individual
to better plan for future expenses."
To qualify for a loan, individuals must provide proof of income, such as a pay stub or account statement.
Paychecks are required to be direct deposited to a Veridian account. Payments on the loan must be made
every payday (weekly, biweekly, semi-monthly or monthly), and borrowers are encouraged to make their
payments through automatic transfers. In fact, the interest rate is reduced from 21% APR to 19% APR if
individuals choose to take advantage of automatic transfers.
Veridian Credit Union, founded in 1934 in Waterloo, Iowa, is a not-for-profit financial cooperative owned by its members. The credit union offers a full range of consumer financial services and employs more than 450 Iowans throughout 21 branches. For more information, visit www.veridiancu.org or call (800) 235-3228.
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For Immediate Release
January 31, 2007
Photos Included:
Click here to view an image of Jean Trainor,
President and CEO of Veridian.
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